According to the co-founder of Multicoin Capital, the Stablecoin-centric genius law enacted in July will trigger an exodus of deposits from traditional bank accounts to high-yield stubcoins.
“The Genius Bill is the beginning of the end of banks’ ability to prey on retail depositors with minimal interest,” Tusha Jain, co-founder and managing partner of Multicoin Capital, posted on X on Saturday.
“Post-genius bill, we expect the big tech giants with mega distribution (Meta, Google, Apple, etc.) to start competing with banks for retail deposits,” Jain added, claiming they will offer better stubcoin yields by seeking instant settlements and 24/7 payouts and offering a better user experience than traditional banking players.
He noted that the banking group attempted to “protect its profits” in mid-August by calling on regulators to close so-called loopholes that could allow stubcoin issuers to pay stubcoin interest or profits through affiliates.
sauce: Tushar Jain
Although the Genius Act prohibits Stablecoin issuers from offering interest or yield to holders of their tokens, it does not explicitly extend the ban to crypto exchanges or affiliated companies, potentially allowing issuers to circumvent the law by offering yield through these partners.
US banking groups are concerned that widespread adoption of ridiculous stubcoins to prop up yields could undermine the traditional banking system, which relies on banks attracting deposits to fund lending.
$6.6 trillion could leave the banking system
Massive idiotic adoption could cause about $6.6 trillion in deposit outflows from the traditional banking system, which the U.S. Treasury estimated in April.
“The result is greater deposit flight risk that undermines credit creation across the economy, especially in times of stress. A corresponding reduction in credit supply means higher interest rates, fewer loans, and higher costs for Main Street businesses and households,” the Banking Policy Institute said in August.
To remain competitive, “banks will have to pay more interest to depositors,” Jain said, adding that “their profits will suffer greatly as a result.”
Stablecoins offer users up to 10x more interest
The average interest rate on savings accounts in the United States is 0.40%, and in Europe, the average fee on savings accounts is 0.25%, Patrick Collison, CEO of the online payments platform, said last week.
Meanwhile, borrowing and lending platforms Tether (USDT) and Circle USDC (USDC) currently charge 4.02% and 3.69%, respectively.
Big tech companies are reportedly investigating Stablecoins
Jain’s bet on Big Tech Giants follows a Fortune Report in June stating that Apple, Google, Airbnb, and X are among the companies exploring issuing Stablecoins to reduce fees and improve cross-border payments. There have been no further developments since then.
Related: All currencies will be stub coins by 2030. Tether co-founder
The Stablecoin market currently sits at $308.3 billion with USDT and USDC leading at $177 billion and $75.2 billion, Coingecko data shows.
The Treasury predicts that Stablecoin market capitalization will increase by another 566% to reach $2 trillion by 2028.
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