“US banks lobby to block stablecoin interest over fears of d
August 30, 2025 | by Sophia Vance

US Banks Lobby to Block Stablecoin Interest Over Fears of Deposit Flight
The battle lines between traditional finance and the rapidly evolving crypto ecosystem have never been sharper. As stablecoins carve a unique position in the financial landscape, providing a bridge between the volatility of cryptocurrencies and the stability of the US dollar, US banks are reacting with a blend of apprehension and aggression. Most recently, a wave of lobbying efforts by major US banks aims to block the possibility of stablecoins earning interest — a move that reflects deep-rooted concerns about massive deposit outflows and the potential destabilization of bank funding models.
The Roots of the Pushback
At face value, stablecoins appear as a logical enhancement to the digital economy: a stable, blockchain-backed digital asset tethered to the US dollar, facilitating instantaneous and frictionless payments. But introducing interest on these stablecoin holdings — essentially enabling users to earn yield directly on their digital dollars — introduces a direct competitive threat to traditional bank deposits.
Banks rely heavily on deposit bases as a foundation for their lending and liquidity strategies. When savers can earn interest on stablecoins without the safeguards, fees, and regulatory overhead typical of bank deposits, it creates a powerful incentive to withdraw funds from traditional banks. This threatens to accelerate a flight of capital away from banking institutions, undermining their primary business models and straining their ability to finance loans and other economic activities.
Lobbying for a Regulatory Firewall
Industry insiders reveal that US banks have ramped up lobbying campaigns aimed at tightening regulations around stablecoins. The core objective? To ensure that stablecoins remain a means of payment only and do not transform into high-yield digital instruments comparable to savings accounts. This stance is echoed strongly in current Congressional discussions and regulatory bodies overseeing the financial system.
“Permitting interest-bearing stablecoins would effectively create a parallel banking system exempt from decades-era compliance and prudential standards. This risks systemic financial instability,” noted a senior banking executive.
Looking closely, this lobbying effort is less about skepticism of blockchain technology and more about protecting entrenched business interests grounded in deposit “stickiness” and regulatory moat advantages. In the words of another finance veteran, this situation reminds us that “Disruption often tests the fortress, and incumbent power always pushes back hard.”
Implications for Investors and the Future of Finance
For investors and everyday users, this battleground over stablecoin interest carries significant implications. On one hand, the allure of earning yield on stablecoins encourages wider adoption of crypto assets and accelerates the digitization of money itself. On the other hand, if regulators side heavily with banks, innovation in this space could stall, imposing an additional cost on the evolution of digital finance.
It’s important to understand that this debate isn’t merely theoretical or political theater. Stablecoins earning yield — whether through decentralized finance mechanisms or centralized platforms — represent a genuine alternative to traditional banking deposit products, sometimes offering higher returns with fewer strings attached. This potential disruption confronts regulatory frameworks and business models designed for a pre-digital era where money flows were slower, visibility was lower, and friction was higher.
Moreover, the outcome of this struggle will shape the competitive dynamics in the financial sector for decades. Do we build an inclusive, efficient, and open digital financial ecosystem that offers consumers diverse choices? Or do we maintain the status quo under the guise of risk mitigation, potentially stifling innovation and locking out new entrants?
Final Takeaway: The Crossroads of Finance and Innovation
The lobbying efforts by US banks to block interest on stablecoins underscore the tension at the heart of today’s financial transformation. They reveal how legacy institutions will vigorously defend foundational elements of their business — namely deposits — even as the broader economy shifts toward decentralized, borderless, and programmable money.
For investors trying to navigate this evolving ecosystem, staying sharp on regulatory developments and understanding the motivations behind these lobbying efforts is critical. The future of money is coming fast, and forces aligned against stablecoin yield offerings highlight the clashes that lay ahead between old and new finance.
Ultimately, this debate is not just about who sits in the driver’s seat of finance—but how resilient and adaptive our global financial system can be in an age defined by technological transformation. The winners will be those who anticipate change rather than resist it, balancing risk management with the imperative for innovation.

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