Crypto-Based Savings-Account Alternative Has Banks Anxious

 

If banks cannot compete with computers that use stablecoin technology that gives good yield, and allows to move money between people cheaply and quickly, then let the banks get extinct. This is what a creative destruction is all about.

 

The perspective that inefficient institutions should be replaced by superior technology aligns with the economic theory of creative destruction, where innovation disrupts existing business models.

 

While stablecoins present a significant competitive threat to traditional banking, the narrative of "bank extinction" is complex, with several key, conflicting viewpoints emerging in 2025-2026:

The Case for Disruption (Creative Destruction)

 

    Superior Efficiency: Stablecoins allow for 24/7/365, near-instant, and low-cost money movement, often outpacing the traditional, slower, and fee-heavy banking system.

    Better Yields: Stablecoins can offer 4-5% APY (and sometimes higher in DeFi), significantly outperforming the national average savings rate (approx. 0.40% APY).

    Deposit Flight: High-yield stablecoins can drive deposit flight, potentially reducing bank lending capacity, with one analysis suggesting every dollar of stablecoin issuance could reduce bank lending by 50 cents.

    Reduced Need for Intermediaries: Stablecoins allow peer-to-peer (P2P) transfers, removing the need for correspondent banks, especially in cross-border transactions, which can save substantial fees.

 

The Counter-Argument (Evolution, Not Extinction)

 

    Collaboration Over Replacement: Rather than becoming extinct, many banks are partnering with stablecoin issuers, acting as custodians of the reserves that back the tokens, or launching their own branded stablecoins.

    Regulatory Backing: The future of stablecoins relies on regulation (e.g., the GENIUS Act), which is designed to make them safer by requiring 100% backing, effectively making them more like "bank-like" entities.

    Tokenized Deposits: Banks are fighting back by developing "bank tokens" or "tokenized deposits," which combine the speed of blockchain with the security of regulated, insured bank deposits.

    Trust and Risk Management: Stablecoins lack FDIC insurance, and during market distress, users may prefer the safety and established trust of traditional banks over uninsured, purely digital assets.

 

Conclusion

Stablecoins are accelerating the unbundling of banking services, forcing banks to rethink how they operate. While the "old way" of banking—relying solely on low-interest deposits and slow, expensive payment networks—is under threat, it is more likely to evolve into a hybrid model where banks integrate digital, blockchain-based assets into their existing, regulated infrastructure.

Yes, if banks would be able to start working with stablecoins themselves that would be fine. They are not able to do that though. Banks are parasitic organizations that in good time get the profit, in bad times unload the loss on the government through many mechanisms. This situation is too good to be abandoned. Also big fees are very addictive.

 

The landscape of banking and stablecoins is currently undergoing a rapid transformation, with 2025-2026 marking a pivot point where traditional financial institutions are increasingly integrating with digital assets rather than ignoring them. The passage of the GENIUS Act in 2025 and subsequent proposed rulemaking by the OCC in early 2026 have created a federal framework for U.S. banks to issue or work with stablecoins.

Here is an analysis of the situation based on recent developments:

1. Are Banks Able to Work with Stablecoins? (The Shift)

Contrary to the notion that banks cannot work with stablecoins, they are actively entering the space.

 

    Direct Issuance: Major banks including Bank of America, Goldman Sachs, JPMorgan Chase, and Wells Fargo are exploring or developing their own stablecoins.

    Regional Bank Adoption: Smaller institutions, such as St. Cloud Financial Credit Union, launched their own stablecoin (Cloud Dollar) in late 2025.

    Settlement Integration: Visa expanded its stablecoin settlement platform in 2025 to include partnerships with banks like Cross River Bank and Lead Bank for USDC settlement.

    Regulatory Framework: The OCC's proposed 2026 rules specifically outline how banks can receive approval to act as "permitted payment stablecoin issuers" (PPSIs), creating a legal pathway for participation.

 

2. The "Parasitic" Argument: Risk and Bailouts

 

The sentiment that banks privatize profits and socialize losses (often referred to as "too big to fail" or "moral hazard") remains a subject of intense public and regulatory debate.

 

    Systemic Risk: The 2023 bank failures (SVB) highlighted how banks holding significant, unrealized losses can cause panic, leading to government intervention to protect depositors.

    The Regulatory Safety Net: FDIC insurance and Federal Reserve backstops are designed to stabilize the system, which critics argue protects banks from the full consequences of risky investments.

    Regulatory Capture: Concerns are frequently raised regarding "regulatory capture," where large financial institutions influence the regulators meant to oversee them.

 

3. The "Addiction" to Fees

 

Bank fees are indeed a significant revenue source, but stablecoins are viewed as a disruptive threat to this model rather than a new way to perpetuate it.

 

    Disrupting High Fees: Traditional cross-border payments can incur fees of up to 6.5%, whereas stablecoin transactions can cost mere cents, posing an existential threat to bank fee revenue.

 

    Losing Deposits: Bank trade associations have expressed deep concern that stablecoins could cause a "$6.6 trillion" flight of deposits, which would reduce banks' ability to provide lending.

    The Shift in Model: Banks are trying to adopt stablecoins to stay relevant in payments, moving away from high-fee models toward providing custody, compliance, and on/off-ramp services for digital assets.

 

Summary of 2026 Outlook

The situation is not a static "parasitic" monopoly. It is a competition. Banks are currently trying to adapt to a new, lower-fee environment. If they successfully issue or manage stablecoins, they will likely adopt new, lower-cost, and more transparent fee structures (or face disintermediation by fintechs and crypto-native firms). This second scenario is most likely since banks are with all their might to kill the crypto native firms in America:

 

“Wendy Owuso keeps about one-quarter of her cash in stablecoins, earning a yield of about 5%. Her traditional savings accounts pay almost nothing.

 

"I'm gonna go where I'm treated best," said Owuso, a cryptocurrency analyst and entrepreneur in Los Angeles.

 

Most of her cash is still in bank accounts to cover bills and other transactions that have to be paid in dollars, but she could see a day when she relies entirely on stablecoins, a digital token designed to mimic the dollar or other currencies in the volatile crypto world.

 

Stablecoins have yet to be widely used as savings or checking accounts, and mostly remain a way for the crypto conversant to buy other digital tokens or transfer money. But the coins are starting to catch on among some crypto users as a way to park money and earn yields -- a development that banks are determined to stamp out before it gets any bigger.

 

It is enough of a threat that the tokens are now at the center of a fight holding up President Trump's push to formalize crypto's role in the financial system.

 

In January, crypto exchange Coinbase helped derail the advancement of legislation to establish a legal framework for digital assets, saying it opposes any such push that would prohibit stablecoin rewards.

 

Banks say allowing stablecoins to pay yields would turn the digital tokens into de facto bank accounts, without the same protections.

 

The crypto and banking industries are working to resolve the impasse, but Trump expressed his frustration at the holdup on Tuesday and railed against banks on social media for undercutting his efforts to make the U.S. the "Crypto Capital of the World."

 

Already, some crypto users are using stablecoins in place of more traditional services.

 

Ashley Wright, a 31-year-old blockchain consultant and crypto investor in Toronto, started using stablecoins to send money to family in Jamaica because she said it was faster and cheaper than wire transfers.

 

"If I send $500, they're gonna get $500," she said.

 

An added benefit: She said she has earned as much as 12% on the money she holds in stablecoins through the crypto exchange Binance and a crypto lending platform, Aave. For now, she keeps only a small slice of her cash in stablecoins for when she wants to send money abroad.

 

"We're not at a place just yet where everything is able to be done with stablecoins," she said.

 

One reason for concern: Stablecoins aren't insured by the Federal Deposit Insurance Corp., a fact stressed by JPMorgan Chase Chief Executive Jamie Dimon in a CNBC interview.

 

Stablecoins are backed by short-term Treasurys or other reserves so that they maintain a 1-to-1 ratio with the dollar or other currencies.

 

But there is no guarantee their value will remain steady, despite their name.

 

Circle's USD Coin, one of the biggest stablecoins, briefly lost its peg to the dollar in 2023 after the failure of Silicon Valley Bank, which held some of the reserves that back the token. The company has since moved its reserves to bigger banks.

 

Big banks are themselves exploring stablecoins to ensure they stay competitive on payments.

 

But they warn that some $6.6 trillion in their customer deposits could be drained if yield-bearing stablecoins are allowed to flourish. The banking industry says that would hurt their ability to lend and would cripple the broader economy, while moving Americans' money into firms that aren't as closely regulated.

 

Even if they don't offer yields, stablecoins could sap $500 billion in U.S. bank deposits over the next three years, according to estimates from Geoff Kendrick, head of digital-assets research at Standard Chartered.

 

Corey Frayer, director of investor protection at the Consumer Federation of America, questioned why anyone would rely on stablecoins.

 

"You give me one real dollar and I give you a fake bank deposit that's not insured by the FDIC and is run by a company that's more likely to fail because it's less regulated," he said.

 

The crypto industry says people should be able to choose the financial tools that work best for them. Some might be tempted by stablecoins' yields, while others might like that the tokens let them send money instantaneously -- with lower costs than more traditional options.

 

Sophia Orlando, a cybersecurity engineer in Connecticut, views her stablecoins as a way to hold dollars that can move quickly online.

 

"It's not changing the value of the dollar," said Orlando, 27. "It's just changing how we send and receive the dollar, without the extra fees, without the banks."

 

She said she keeps about 20% of her crypto holdings in stablecoins and is waiting for the infrastructure to catch up to the idea.” [A]

 

A. Crypto-Based Savings-Account Alternative Has Banks Anxious. Brown, Dalvin.  Wall Street Journal, Eastern edition; New York, N.Y.. 06 Mar 2026: B1.