Rebecca Cruz The GENIUS Act could mark a turning point for the banking industry as stablecoins offer higher yields and Big Tech enters the race for retail deposits.
GENIUS Act Signals the Beginning of Banking’s Deposit Crisis
The U.S. banking system may be on the cusp of its most disruptive challenge yet. With the GENIUS Act now in motion, stablecoins are emerging as a direct competitor to traditional savings accounts, offering retail depositors far more attractive yields. Multicoin Capital’s co-founder Tushar Jain has called this a “seismic shift” that could end decades of banks profiting from low-interest savings accounts.
For consumers, this could mean the end of being shortchanged with rates as low as 0.25%–0.40% while digital assets deliver significantly higher returns. For banks, however, the threat is existential.
Why the GENIUS Act Matters
Enacted in July, the GENIUS Act sets new rules for stablecoin issuers but contains a regulatory gap that could reshape the financial landscape. While it restricts issuers themselves from paying direct interest on stablecoins, it leaves space for affiliated businesses—such as crypto exchanges—to offer yield products.
This “loophole” has already sparked backlash from U.S. banking associations, who warn that widespread adoption of yield-bearing stablecoins could trigger massive outflows from banks. According to Treasury estimates, as much as $6.6 trillion in deposits could migrate out of the banking system.Big Tech Ready to Compete with Banks
The shift may not just be led by crypto-native firms. Jain predicts that tech giants like Apple, Google, and Meta are perfectly positioned to enter the market. With global reach, user-friendly platforms, and existing payments infrastructure, Big Tech could roll out stablecoin products that beat banks at their own game—offering faster payments, instant settlements, and higher yields.
While none of these companies have officially launched a stablecoin product, reports earlier this year suggested that Silicon Valley heavyweights were actively exploring it. If even one major tech player makes the move, the competitive pressure on banks could become overwhelming.
Stablecoins Offer 10X More Yield Than Banks
The numbers highlight the problem for legacy finance. Average U.S. savings accounts return 0.40%, while European banks pay just 0.25%. Compare that to stablecoin platforms, where annual yields can reach several percentage points higher—sometimes offering 10X more interest.
It’s no surprise that stablecoins like Tether (USDT) and USD Coin (USDC) dominate the market, with market caps of $177 billion and $75.2 billion respectively. The total stablecoin sector already stands at $308 billion, and the U.S. Treasury projects a staggering $2 trillion market cap by 2028.
This growth trajectory reflects not only investor demand but also consumer frustration with traditional banking’s failure to adapt.
Banks Face the Deposit Flight Dilemma
The Bank Policy Institute has raised alarms about the risks of deposit flight. If stablecoins draw massive inflows, banks may struggle to fund lending, pushing up interest rates on credit and tightening access to capital for households and businesses.
In short, the system that underpins credit creation could weaken, forcing banks into a corner. To survive, they would have to raise interest rates on deposits—cutting into profits they’ve long protected. Jain put it bluntly: “Banks are going to have to pay more interest, and their earnings will significantly suffer.”
The Future of Money: Stablecoins, Not Savings Accounts?
The implications of the GENIUS Act go beyond banking competition. Stablecoins represent a new financial standard: instant, borderless, and efficient. With potential adoption by Big Tech and the regulatory green light for affiliated yield products, traditional banks may find themselves rapidly losing relevance.
Consumers stand to gain the most. Higher yields, faster payments, and greater transparency could redefine how everyday people think about saving and spending. For the banking sector, however, the GENIUS Act might be remembered as the moment the old model of deposit-driven finance began to unravel.
Conclusion
The GENIUS Act is more than a regulatory tweak—it’s a potential turning point for the global financial system. With stablecoins set to outcompete banks on yield, usability, and technology, the future of deposits may no longer sit inside a bank account but inside a digital wallet.
If Treasury forecasts hold true, the coming years could see trillions shifting into stablecoins. That’s not just disruption—it’s transformation.
Disclaimer: Parts of this article were generated with the assistance from AI tools and reviewed by our editorial team to ensure accuracy and adherence to our standards.
