Stablecoin Controversy Intensifies as Banking Industry Challenges DeFi

The banking industry is intensifying its pushback against stablecoins and decentralized finance (DeFi) applications, citing potential threats to financial stability and retail investors. While the GENIUS Act, a new regulatory framework for stablecoins, was passed in July, several key institutions remain critical of their integration into traditional finance. Key concerns revolve around the risk of depegging events (like the recent fall of USDC), DeFi lending platforms’ leverage exposure, and the lack of traditional banking safeguards like deposit insurance and lender-of-last-resort access.