Bank of America CEO Warns $6T in Deposits Could Flow into Stablecoins
Bank of America CEO Brian Moynihan has warned that stablecoins might pull trillions of {dollars} out of the US banking system, underscoring rising tensions between conventional lenders and the digital asset trade.
Key Takeaways:
- Up to $6 trillion in US financial institution deposits might transfer into stablecoins, based on Bank of America’s CEO.
- Banks warn yield-bearing stablecoins might drain deposits and restrict lending.
- Lawmakers are pushing to curb stablecoin yields as a crypto invoice nears a deadline.
Speaking during the bank’s Wednesday earnings call, Moynihan stated as a lot as $6 trillion in deposits, roughly 30% to 35% of all US business financial institution deposits, might migrate into stablecoins beneath sure regulatory outcomes.
Moynihan stated the estimate was primarily based on Treasury Department research and linked the potential shift to an ongoing legislative debate over interest-bearing stablecoins.
Banks Warn Stablecoin Yields Could Speed Deposit Outflows
At problem is whether or not issuers must be allowed to supply yield on stablecoin balances, a function banks argue might speed up deposit outflows by giving shoppers a bank-like product with out bank-style regulation.
According to Moynihan, many stablecoin fashions resemble cash market mutual funds reasonably than conventional deposits.
Reserves are usually held in short-term devices equivalent to U.S. Treasurys, reasonably than recycled into lending for households and companies.
That dynamic, he stated, might shrink the deposit base banks depend on to fund loans throughout the economic system.
“If you are taking out deposits, they’re both not going to have the ability to mortgage or they’re going to should get wholesale funding,” Moynihan stated, including that various funding sources would probably come at a better price.
Lawmakers at the moment are racing to settle these points because the Senate Banking Committee works on a negotiated crypto market construction invoice.
The newest draft, launched Jan. 9 by committee chair Tim Scott, contains language that will bar digital asset service suppliers from paying curiosity or yield to customers merely for holding stablecoins.
At the identical time, the proposal permits activity-based rewards tied to features equivalent to staking, liquidity provision or posting collateral, drawing a transparent line between passive balances and energetic participation.
Pressure on the invoice has intensified because the committee faces tight legislative timelines. More than 70 amendments had been filed forward of a deliberate markup this week, reflecting heavy lobbying from each banking teams and crypto corporations.
Other unresolved points embody proposed ethics provisions, which gained consideration following experiences that President Donald Trump earned lots of of thousands and thousands of {dollars} from family-linked crypto ventures.
Galaxy Research Warns Crypto Bill Could Expand Treasury Surveillance
The draft has additionally sparked concern exterior the banking sector. A latest report from Galaxy Research warned the invoice might considerably expand Treasury Department surveillance powers over digital asset transactions.
Meanwhile, trade help has begun to fracture. Coinbase CEO Brian Armstrong said Wednesday the exchange couldn’t again the invoice, citing provisions he argued would successfully get rid of stablecoin rewards.
Later that day, Scott introduced the committee had postponed the scheduled markup, saying negotiations had been ongoing and that “everybody stays on the desk working in good religion.”
The submit Bank of America CEO Warns $6T in Deposits Could Flow into Stablecoins appeared first on Cryptonews.
