Yield-Bearing Stablecoins Ignite a Broader Debate Over the Future of U.S. Deposits

As Congress debates crypto market structure legislation, one of the most controversial issues is whether stablecoins should be allowed to pay yield. While this may appear to be a narrow dispute within the crypto industry, it actually touches the core of the U.S. financial system and the long-standing role of bank deposits.

Traditional banks argue that allowing yield-bearing stablecoins would pull deposits out of the banking system, weakening credit creation and increasing borrowing costs for households and businesses. Crypto industry advocates counter that stablecoin rewards simply give consumers access to returns already generated by their own capital. At its heart, the debate is not really about stablecoins, but about who benefits from consumer balances.

For decades, most U.S. consumers have earned little or no interest on their deposits. Banks, meanwhile, have used those funds for lending and investments, capturing most of the economic upside while providing safety, liquidity, and convenience in return. This arrangement persisted largely because consumers had few alternatives. New financial technology is now changing that reality.

Today, expectations around money are shifting. Consumers increasingly expect balances to earn yield by default rather than as an opt-in feature. Yield is becoming passive, transparent, and accessible, not restricted to sophisticated investors. Once this expectation takes hold, it is unlikely to remain limited to crypto. Tokenized cash, tokenized Treasuries, onchain bank deposits, and digital securities are all part of the same structural evolution.

Critics warn that direct consumer yield could reduce available credit. History suggests otherwise. Previous innovations such as money-market funds, securitization, and nonbank lending reshaped credit markets without eliminating credit itself. Instead, credit moved into clearer, market-based channels where risks and returns were more explicit.

The rise of programmable assets, yield-bearing wrappers, and automated allocation systems signals a shift from institution-centric finance to infrastructure-driven finance. Intermediation still exists, but it becomes rule-based and transparent rather than opaque and balance-sheet driven.

Ultimately, the stablecoin yield debate is a preview of a broader policy question: whether regulators will try to preserve a low-yield deposit model or adapt to a future where consumers directly participate in the value their money generates. Regulation will shape this transition, but it is unlikely to stop it.