Bitwise CIO Calls on US Banks to Raise Deposit Rates to Counter Stablecoin Threat
Matt Hougan, Chief Investment Officer at Bitwise Asset Management, has urged US banks to offer more competitive interest rates on deposits instead of expressing concern over stablecoins undermining their business model. In a recent post on X, Hougan emphasized that banks should respond to competition by improving rewards for depositors rather than lamenting the rise of stablecoins.
Stablecoins Present Competitive Pressure with Higher Yields
Hougan argued that banks have long exploited depositors by providing minimal interest, effectively using deposits as a low-cost funding source. He highlighted that some stablecoins currently offer yields as high as 5% on crypto platforms, significantly outpacing the US national average savings rate of approximately 0.6% and even exceeding the best high-yield bank accounts capped near 4%, according to Bankrate data.
This disparity in returns is driving consumer interest toward stablecoins, which also offer faster and cheaper transactions without holding fees. Hougan criticized recent media narratives warning that stablecoins could destabilize local lending markets as “classic first-order thinking.” He noted that while banks may see reduced deposits, decentralized finance (DeFi) platforms enable stablecoin holders to lend directly to borrowers, sustaining credit availability outside traditional banking.
Bank Lobbying Against Stablecoin Yield Offerings
Last month, the banking sector intensified efforts to influence US legislation, particularly targeting the GENIUS Act, to close perceived regulatory gaps that allow stablecoin issuers to provide yield-bearing products. Banks contend this practice undermines traditional deposit models and poses systemic risks. However, crypto advocates argue that restricting stablecoin yields would hinder innovation and limit consumer choice.
Implications for Savers and the Banking Industry
Hougan concluded that the primary consequence of stablecoin competition will be pressure on bank profit margins rather than a credit crunch. He views the shift as beneficial for individual savers who gain access to higher returns and more efficient financial services. The evolving landscape suggests banks may need to adjust their strategies to retain deposits and remain competitive amid the growing influence of stablecoins and decentralized finance.
FinOracleAI — Market View
The emergence of yield-bearing stablecoins offering returns surpassing traditional bank savings accounts presents a tangible competitive threat to US banks’ deposit bases. Banks face pressure to increase interest rates or risk losing customers to crypto platforms. Regulatory developments around stablecoin yields remain a critical factor, with potential legislative changes influencing market dynamics.
Risks include possible accelerated outflows from smaller banks dependent on deposits and heightened regulatory scrutiny that could reshape stablecoin offerings. Market participants should monitor congressional actions on stablecoin legislation and shifts in bank deposit rates as key indicators of the evolving competitive landscape.
Impact: negative
