Citi: Stablecoin Interest May Trigger Bank Deposit Outflows

According to a report by Jinse Finance, Ronit Ghose, Head of Future Finance at Citi, has warned that if stablecoin holders receive interest, it could trigger a large-scale outflow of bank deposits similar to the rise of money market funds in the 1980s, thereby increasing banks’ funding costs and the price of credit. PwC consultant Sean Viergutz also noted that if consumers shift to high-yield stablecoins, banks may be forced to rely on wholesale funding or raise deposit rates, which would increase borrowing costs for businesses and households. Currently, the U.S. GENIUS Act prohibits stablecoin issuers from directly paying interest, but does not ban exchanges or affiliated companies from offering yields. U.S. banking groups are calling on regulators to close this “loophole” to prevent a massive outflow of deposits.