Citi’s Ronit Ghose cautioned that offering interest on stablecoin deposits might lead to significant outflows from banks, reminiscent of the money market fund surge in the 1980s. Following a report by the Financial Times, Ghose highlighted that such withdrawals could mirror historical bank outflows when money market funds grew from $4 billion in 1975 to $235 billion by 1982, causing a $32 billion net withdrawal from bank accounts. Similarly, Sean Viergutz from PwC warned that banks might face increased funding costs and subsequently more expensive credit for consumers and businesses due to a shift toward higher-yielding stablecoins. While US regulations currently prevent stablecoin issuers from offering yields directly, it does not prohibit crypto exchanges from doing so. The Banking Policy Institute expressed concerns that a loophole could lead to a $6.6 trillion outflow from traditional banking. Despite regulatory challenges, the US government supports adopting dollar-pegged stablecoins to maintain the dollar's status as a global reserve currency, with ongoing discussions on stabilizing this emerging sector.

Source 🔗