Citi Executive Warns Stablecoin Yields Could Drain Bank Deposits (cointelegraph.com)
- Reference: 0178888668
- News link: https://slashdot.org/story/25/08/26/2338207/citi-executive-warns-stablecoin-yields-could-drain-bank-deposits
- Source link: https://cointelegraph.com/news/citi-executive-stablecoin-yields-drain-bank-deposits-report
> Paying interest on stablecoin deposits [1]could spark a wave of bank outflows similar to the money market fund boom of the 1980s, Citi's Future of Finance head Ronit Ghose warned in a report published Monday. According to the [2]Financial Times , Ghose compared the potential outflows caused by paying interest on stablecoins to the rise of money market funds in the late 1970s and early 1980s. Those funds ballooned from about $4 billion in 1975 to $235 billion in 1982, outpacing banks whose deposit rates were tightly regulated, Federal Reserve data showed. Withdrawals from bank accounts exceeded new deposits by $32 billion between 1981 and 1982.
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> Sean Viergutz, banking and capital markets advisory leader at consultancy PwC, similarly suggested that a shift from consumers to higher-yielding stablecoins could spell trouble for the banking sector. "Banks may face higher funding costs by relying more on wholesale markets or raising deposit rates, which could make credit more expensive for households and businesses," he said. The GENIUS Act does not allow stablecoin issuers to offer interest to holders, but it does not extend the ban to crypto exchanges or affiliated businesses. The regulatory setup led to a significant reaction by the banking sector.
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> Several US banking groups led by the Bank Policy Institute have urged local regulators to close what they say is a loophole that may indirectly allow stablecoin issuers to pay interest or yields on stablecoins. In a recent letter, the organization argued that the so-called loophole may disrupt the flow of credit to American businesses and families, potentially triggering $6.6 trillion in deposit outflows from the traditional banking system.
[1] https://cointelegraph.com/news/citi-executive-stablecoin-yields-drain-bank-deposits-report
[2] https://www.ft.com/content/7c4746d7-02e8-4c60-a96c-b51eb21a7bf1
Join the ponzi stampede, everyone (Score:2)
The bank boys are waiting for you there.
Re: (Score:3)
I assume for every 1 stable coin handed out that the The Feds remove 1 dollar from circulation right? I mean come on, you can't just create something out of thin air that can be traded in for dollars and insured. Oh wait. Damn.
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I assume that behind every financial scheme there are the bankers who made a killing during every "financial crisis" who know how to go around all those pesky "regulations" that "block innovation".
And when some of the "stable" coin co's (Score:2)
go bellyup I can't wait to hear the screaming about bail them out. Part of the deal with putting money in a bank is it is FDIC insured. I really hope that the "thoughts and prayers" crowd realizes that when their lifetime savings just went up in smoke at the local "stable" coin franchise.
And sure the stable coins will be backed by treasuries or some other thing, but the problem is that the stable co's directors are using the money for hookers and blow. Not for the treasuries you thought they were buying wi
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go bellyup I can't wait to hear the screaming about bail them out. Part of the deal with putting money in a bank is it is FDIC insured.
The government could create FDIC insurance for a stablecoin. The whole point of a stablecoin is it's supposed to be backed by a specific hard asset or by a mix of hard assets. JMO - The government should be working on setting regulatory standards Stablecoins have to meet Including.
1. Registration similar to stock and bond issuers
2. Declared reserves.
3. Proof of sta
banks have deposits to have outflows? (Score:3)
I have not kept more than 2 months worth of cash in my bank for 15 years. I find it hard to believe many people keep significant amounts of cash in banks anymore. Are there even balances that could outflow to stablecoins? Who keeps piles of cash in a bank while you could hold stocks, mutual funds, bitcoin etc. Stablecoins aren't a threat at all, unless a new kind of bank appears that replaces trad banks in utility by using a stable coin.
Scale (Score:2)
You have to account for scale with these big banks. If a million depositors have just $10,000 in their account, a reasonable cushion for emergencies, that's $10 billion dollars. Citi has 200 million accounts globally.
Compounding their problems is that banks have been discouraging accounts with high dollar amounts. They don't want to be required to cover the potential large outflow of cash if a billionaire decides they want to pay cash to buy some company, and takes out $20 million all at once. This pushes
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USD backed stablecoin would not "drain" any US accounts, everyone in the US has phyiscal/traditional digital USD. A USD backed stablecoin would drain foreign banks if citizens want a low friction way to own USD in the form of a US stablecoin. A good example are the currencies with wild fluxuations, developing countries, where the builk of imports are paid in USD today, while their currencies have wild swings. A US backed stablecoin can stabilize their global buying power while a flight would occur from t
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> I have not kept more than 2 months worth of cash in my bank for 15 years. I find it hard to believe many people keep significant amounts of cash in banks anymore. Are there even balances that could outflow to stablecoins? Who keeps piles of cash in a bank while you could hold stocks, mutual funds, bitcoin etc. Stablecoins aren't a threat at all, unless a new kind of bank appears that replaces trad banks in utility by using a stable coin.
That's nice, but if you think you're typical you're wrong. Most people can't seem to keep that much cash in the bank. The [1]median transaction account balance [bankrate.com] (savings, checking, and money market accounts combined) is $8,000. The average is much, much higher, which means that the values below median are pretty small, and about 59% of Americans couldn’t cover a $1,000 emergency expense from their savings in 2025. Someone who can't come up with a kilobuck for an emergency isn't going to be playing the sto
[1] https://www.bankrate.com/banking/savings/savings-account-average-balance/
Quit building branch offices (Score:2)
Banks should quit building branches. They don't need the real estate anymore. Hell, Chase has gone so far as to do away with safety deposit boxes entirely so there literally is almost no reason to go to a branch unless you need cash and these days, I never use cash.
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You must not own anything. All my titles, SS card, birth/marriage certificates, gold etc in a fire suppression safety deposit box. You must have bought fake real estate in the metaverse. If you hate real estate, even Etrade offers traditional banking services with zero cost ATM transactions at any machine.
How does it come about? (Score:2)
My understanding is that stablecoins are backed by various financial instruments traded at market prices - bonds etc. - and this is what gives the yield. These instruments long predate stablecoins... so what is it that makes stablecoin? Of course their use in stablecoins could increase the total volume, but supposedly each instrument in and of itself is an individual transaction, represents what the participant considers a good deal (risk/value-wise) and where they can meet any obligation etc. So if stablec
No worries (Score:5, Insightful)
If the banks fail we'll give them a handout. Privatize the profits and socialize the losses.
Re:No worries (Score:4, Interesting)
You could call this a hold-up situation. The bank has us by the balls. Since they are not run by elected officials, this is a very worrying situation. They are in a position of incredible power. I am surprised they haven't abused it more.
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That's what gold used to be. The defacto tender for all transactions. Then the banks stepped in and issued currency backed by gold. Moving the metal to Fort Knox. And soon therefter, golds status as backing was rescinded, making the currency prima fascia tender. The banks are just afraid that their currency will suffer the same fate. Stuffed in a vault as backing for the tender used for actual commerce.
Re:No worries (Score:4, Insightful)
> Banks are financial infrastructure, but too many want to treat them like a typical private company. They are not comparable: if say Target bellies up, nothing notable happens, but if a top bank sinks, it can easily set off a chain reaction of financial panic.
Banks have made themselves infrastructure, but they are privately held businesses and individuals profit greatly off of them. Like all "too big to fail" businesses, they've been allowed to put themselves in a parasitic relationship with our civilization and done it in such a way that if they fuck up royally enough, the civilization has to step in to save them. If they do great things, they get to keep their earnings. Too much of society is beholden to large for-profit industry, including banks. It's almost as if society's purpose is profit for the few, on the backs of the many.
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Be specific about bailouts
Auto bailouts were loans that were paid back (with interest)
Bank bailouts were with some conditions they had to loan out money
There was a lot so be specific, there probably were some questionable ones but be specific.
Theres nothing wrong with the public being invested into the largest American enterprises but the way Trump is doing it is corrupt and transparently in the name of graft. Also we lose long term if Intel doesn't use that money for fans and manufacturing now.
What if we don't? (Score:2)
What if Trump and heritage foundation goons propping him up let them collapse so they can use stable coins to create a new banking system for themselves and only themselves?
Sure that's probably not going to work but those people are crazy and stupid. So they might try anyway.
I keep saying this but folks need to understand that every single system designed to protect you has failed. All of them.