A Columbia Business School professor has challenged what he calls unfounded worries in Washington regarding stablecoin yields and their potential to undermine the United States banking system. US lawmakers are preparing to advance a long-awaited crypto market structure bill.
In a post on social media platform X on 13 January, Omid Malekan, an adjunct professor at Columbia Business School, said he was disappointed that negotiations on the bill were being slowed by concerns over whether stablecoin issuers should be allowed to share yield with users. He described much of the debate in Congress as driven by “unsubstantiated myths” promoted by the banking lobby.
Stablecoins And Bank Deposits
Malekan argued that the growing use of dollar-backed tokens does not necessarily drain deposits from banks and may even expand them, especially since demand comes largely from overseas users who struggle to access United States dollars through traditional channels.
Major issuers hold reserves in a mix of Treasury bills and commercial bank deposits, he noted, meaning that each new stablecoin can translate into fresh funds in the banking system and more activity tied to government securities.
Malekan linked his argument to the proposed Genius Act, which he said was explicit about allowing issuers to pay rewards to customers, and questioned why a practice that puts more income in the hands of households should be described as a loophole.
Credit Supply, Not Profits, Should Be The Focus
A second misconception, Malekan said, is that domestic stablecoin adoption would weaken the ability of banks to extend credit. Competition for deposits squeezes profitability, he said, but does not have to reduce lending. He pointed to strong earnings at large banks and sizeable balances that they currently keep on deposit at the Federal Reserve, which could be drawn down if they needed to replace lost funding.
“Per an analysis conducted by the Financial Times, the banking industry pocketed an additional $1 trillion in net-interest profits during a recent two-year period. J.P. Morgan alone may have made $100 billion last year. That’s a lot of firepower to compete with whatever third-party rewards stablecoins pay consumers,” Malekan said.
Banks Are Not The Dominant Source Of Credit
Malekan also disputed the idea that banks must be shielded from stablecoin rivals because they are the main source of credit in the economy. He said banks account for only about a fifth of lending to households and businesses, with money market funds, securitization vehicles, private credit funds, and insurers providing the bulk. Many of those lenders could benefit from faster and cheaper stablecoin-based payments, he added, and their products are often linked to Treasury yields that might fall if demand for government debt rises.
“Widespread adoption of stablecoins is likely to lower the U.S. government’s borrowing costs, which in itself is a reason to welcome them because it saves taxpayers money,” Malekan wrote. “Since most credit in the United States is benchmarked to Treasury rates, you could end up in a situation where stablecoins reduce bank deposits but at the same time push down average borrowing costs.”
Community Banks Not The Main Casualty
Malekan also rejected claims that community and regional banks would be hit hardest by stablecoin adoption. He said stablecoins function primarily as payment instruments and therefore compete more with large transaction banks that run global payment networks than with local lenders focused on relationship banking.
Smaller banks, he noted, already tend to pay higher rates to depositors and serve older customers who are less likely to move into crypto products.
Borrowers And Savers Both Matter
On the distributional impact, Malekan criticized efforts to block issuers from sharing yield as a policy that favors borrowers and bank shareholders over savers, including retirees who rely on interest income. Since the return on stablecoin reserves ultimately comes from U.S. government debt, and therefore taxpayers, he asked why those gains should accrue only to banks.
Call For Clear Rules On Digital Dollars
Malekan concluded by urging lawmakers not to let fear and speculation derail the bill, saying the crypto sector needs clear rules to mature and that United States banks are strong enough to compete with new digital payment instruments.
