Circle CEO Rejects Claims Stablecoin Yields Threaten Banks
Circle CEO Jeremy Allaire dismissed banking business warnings that stablecoin rewards may destabilize conventional finance, calling such considerations “completely absurd” throughout a World Economic Forum panel discussion on Thursday.
His remarks got here amid escalating tensions between crypto platforms and banks over provisions in pending U.S. market structure legislation.
Speaking on the Davos summit, Allaire defended the stablecoin business’s development trajectory whereas addressing claims from Bank of America CEO Brian Moynihan that yield-bearing digital {dollars} may set off huge deposit flight from industrial banks.
The panel, which included International Monetary Fund First Deputy Managing Director Dan Katz and improvement finance skilled Vera Songwe, examined stablecoins’ increasing function in world funds following final 12 months’s passage of the GENIUS Act.
Banks Warn of “Parallel Banking System”
Banking executives have intensified lobbying in opposition to stablecoin rewards applications, with JPMorgan CFO Jeremy Barnum recently warning that interest-paying tokens create “a parallel banking system that kind of has all of the options of banking, together with one thing that appears so much like a deposit that pays curiosity, with out the related prudential safeguards.“
The Community Bankers Council of the American Bankers Association additionally urged Congress earlier this month to shut what it referred to as a “loophole” permitting stablecoin issuers to not directly fund yield via alternate companions.
Community bankers warned that large-scale deposit outflows may scale back credit score availability for small companies and homebuyers.
@JPMorgan backs blockchain innovation however warns yield-bearing stablecoins mimic financial institution deposits with out oversight.#JPMorgan #Stablecoinhttps://t.co/4Fbu8pMOwk
— Cryptonews.com (@cryptonews) January 14, 2026
Allaire countered that such arguments ignore monetary market historical past and mischaracterize how stablecoins operate inside regulatory frameworks.
“Rewards round monetary merchandise exist in each steadiness that you’ve with a bank card that you simply use,” he stated, noting these incentives assist with buyer retention with out functioning as financial coverage dampeners.
Money Market Funds Precedent Cited
The Circle chief government drew parallels to authorities cash market funds, which banking teams as soon as claimed would devastate deposit bases.
“The very same arguments have been made,” Allaire acknowledged, stating that roughly $11 trillion in cash market funds has grown with out stopping lending exercise.
He argued that lending itself has shifted towards non-public credit score markets, with “the huge overwhelming majority of GDP development within the United States” traditionally funded via capital market formation round junk bonds quite than financial institution credit score.
Allaire emphasised that every one main stablecoin rules (together with the GENIUS Act, Europe’s MiCA framework, and legal guidelines in Japan, UAE, Hong Kong, and Singapore) explicitly prohibit stablecoin issuers from paying curiosity.
“Payment stablecoins” are legally outlined as money devices used for settlement and require cash-level safeguards underneath supervision by central bankers and world standard-setters.
While Circle generates revenue from reserves and revenue-sharing partnerships with platforms like Coinbase, Binance, and Visa, the corporate itself can’t pay curiosity on to tokenholders.
Partner platforms might provide rewards based mostly on their very own industrial preparations, however Allaire argued that this mirrors loyalty applications throughout conventional monetary merchandise.
IMF Acknowledges Benefits Amid Risks
The IMF’s Katz acknowledged stablecoins current “very important potential advantages” for cross-border funds and monetary inclusion whereas noting dangers together with banking disintermediation and forex substitution in rising markets.
Transaction volumes reached $33 trillion in 2025, up 72% from the earlier 12 months, with USDC processing $18.3 trillion to guide all stablecoins by cost movement.
Katz emphasised the significance of worldwide regulatory interoperability, stating that realizing stablecoins’ full advantages requires scale and efficient cross-border frameworks.
He identified the aggressive pressures stablecoins create for conventional finance and weak fiscal regimes alike.
Songwe detailed stablecoins’ transformative impression throughout Africa, the place remittance prices averaging 6% can drop to underneath $1 with digital greenback transfers that full in minutes, versus five-day settlement delays.
With 650 million Africans missing financial institution accounts and 12-15 nations experiencing inflation above 20%, stablecoins present dollar-denominated financial savings accessible by way of smartphones.
Egypt, Nigeria, and Ethiopia lead African adoption, with most transactions under $1 million, indicating heavy small-business use.
In reality, in line with Chainalysis, Sub-Saharan Africa acquired over $205 billion in on-chain worth, up roughly 52% from the earlier 12 months between July 2024 and June 2025.
However, Songwe famous that 75% of stablecoin reserves stay dollar-denominated, prompting the event of SDR-backed options to scale back greenback dependency and enhance transparency round illicit monetary flows.
Allaire concluded that stablecoins ought to stay “money instrument cash, credentially supervised, very very protected cash,” with environment friendly credit score supply methods constructed atop them via decentralized finance protocols that may be “safer, extra clear, extra environment friendly, extra inclusive, and extra globally obtainable than what we have now with financial institution credit score immediately.“
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