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Stablecoin Panic? Professor Says Banks Are Chasing Myths, Not Facts

Columbia Business School adjunct professor Omid Malekan challenged what he referred to as 5 widespread banking-industry misunderstandings about stablecoin yields as Congress strikes a market construction invoice towards markup this month.

He pushed back on claims that stablecoins will robotically drain financial institution deposits or collapse lending, and argued the true battle is over who receives curiosity on the reserves that again these tokens.

“I’m disenchanted that market construction laws appears to be held up by the stablecoin yield difficulty,” he mentioned. “Most of the issues bouncing round Washington are primarily based on unsubstantiated myths,” Malekan added.

Misconceptions About Stablecoin Yields

Based on experiences, Malekan listed 5 particular factors the place {industry} speaking factors have wandered from the information. He mentioned stablecoins are absolutely reserved in lots of circumstances, and that issuers typically park reserves in Treasury payments and financial institution accounts — exercise that may feed, not sap, banking enterprise.

He additionally famous that a lot US credit score is delivered outdoors neighborhood banks, by means of cash market funds and personal lenders, so the hyperlink between stablecoins and financial institution lending will not be as direct as some {industry} statements suggest.

Banks Press Lawmakers Over Yield Rules

Lawmakers are racing to settle these questions earlier than a committee markup. The Senate Banking Committee is scheduled to mark up the market construction textual content on January 15, 2026, and sources say negotiators stay break up on whether or not to limit third-party yield preparations tied to stablecoins.

Community banks and commerce teams have urged senators to shut what they name “yield loopholes,” saying unregulated rewards might lure deposits away and lift liquidity dangers.

Who Captures The Interest Matters

Malekan centered consideration on the distribution of curiosity from reserve property. According to his feedback, the coverage selection will not be about banning stablecoins however about deciding whether or not banks or crypto issuers seize returns on reserves.

If issuers are allowed to share curiosity or rewards with prospects, that might stress financial institution earnings — a degree banks are making loudly in hearings and letters to lawmakers.

File Drafting And Last-Minute Haggling

Reports have disclosed that committee workers had been racing to file a bipartisan market structure text and reconcile yield language forward of a deadline this week. Negotiations continued into late classes as senators weighed compromises that might permit some types of rewards whereas guarding towards run dangers and financial institution disintermediation.

Featured picture from Global Finance Magazine, chart from TradingView

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