Banks vs. Stablecoins: The $6.6T Power Struggle

Welcome back, friends —

This week, banks saw the future and it looked a lot like a stablecoin.

The GENIUS Act loophole has them sweating, Pump.fun’s making moves, Circle’s testing the market, and Coinbase is playing the long DeFi game.

Let’s break it down.

🧠 Banks vs. Stablecoins — the $6.6 trillion tug of war

U.S. banks are ringing the alarm bells. Again.

This time, it’s about a potential loophole in the GENIUS Act that lets stablecoin issuers and their crypto partners quietly offer yield-like rewards, bypassing direct interest bans.

Banking lobbyists want Congress to amend the GENIUS Act to block not just issuers, but also crypto exchanges and affiliates from offering rewards on stablecoins. They warn $6.6 trillion could shift from banks to stablecoins, hurting lending and raising interest rates.

Platforms like Coinbase and PayPal already offer “rewards” on USDC. Brian Armstrong calls them "rewards," not "interest." The semantics matter, legally.

Why this matters:

• Deposits are the core of banking: they fuel lending. If those funds shift into stablecoins en masse, small businesses and households could lose credit access and banks could lose huge profits.

• The U.S. Treasury projects stablecoins could hit $2 trillion by 2028, up from $280B today.

• If banks lose that capital base, they argue, interest rates would spike, and lending would dry up especially during market panics.

What they're saying:

• “Stablecoins aren’t deposits, they don’t lend or invest like banks do.” — American Bankers Association

• “We don’t pay interest or yield, we pay rewards.” — Brian Armstrong, Coinbase

• “If stablecoins offer returns, that’s a backdoor bank account with none of the rules.” — Bank Policy Institute

The real battle:

This isn’t just about a bill. It’s about who gets to control the flow of money: Big banks or Crypto.

Banks want stablecoins boxed into payment-only tools. Crypto sees them as programmable dollars with returns, staking, and utility baked in.

If Congress sides with the banks, platforms like Coinbase may be forced to change how they reward users.

But if the loophole stays open, stablecoins might eat banking's lunch, one “reward” at a time.

TLDR: Why are U.S. banks going after the GENIUS Act?

• Passed earlier this year, it bans issuers of stablecoins from paying interest or yield to users.

• Exchanges like Coinbase and PayPal can still offer “rewards” on stablecoins like USDC and it’s not clearly banned under the current language.

• They argue it’s a backdoor yield scheme that could steal trillions from traditional deposits without the same regulations.

• Up to $6.6 trillion could flow from banks to stablecoins, draining credit markets and raising interest rates.

• Fewer deposits = less money to lend = higher borrowing costs = economic slowdown.

• Banks are pushing Congress to tighten the GENIUS Act, closing the affiliate loophole before it’s too late.

Fresh off a 450% post-IPO rally, Circle announced a 10M share offering: 2M new shares and 8M from insiders. Investors reacted fast, sending the stock down 5% in after-hours trading.

But it wasn’t just dilution jitters:
🧾 Q2 loss of $4.48/share (mostly IPO costs)
📈 Revenue up 53% on stablecoin demand
📉 Investors braced for more insider selling

Why Coinbase’s DeFi liquidity splash matters now

1/ Coinbase has revived its Stablecoin Bootstrap Fund, a program dormant since 2019 with a fresh mission: to inject stablecoin liquidity into DeFi. Initial allocations target Aave, Morpho (Ethereum), Kamino, and Jupiter (Solana).

2/ Industry-wide, this arrives at an inflection point. DeFi loan activity recently hit $40.7 billion, while USDC already underpins $8.9 billion in TVL and $2.7 trillion in volume last year. Coinbase wants to keep USDC at the center.

3/ This isn’t just a liquidity patch, it’s part of a strategy to support emerging projects, reduce slippage, and stabilize borrowing rates. Coinbase is steering stablecoin utility across Ethereum, Solana, Base, and beyond.

4/ A stronger USDC clears friction in DeFi, empowers upstarts, and reinforces Coinbase's role in the future of digital finance. That’s not just influence—it’s infrastructural backbone.

• ETH open interest tests new peaks as price inches closer to all-time high

• OKB blasts by 173% after 65.26M token burn, swap plans

• Eric Trump to ring NASDAQ opening bell as ALT5 Sigma invests $1.5B in WLFI

• Metaplanet accelerates Bitcoin plan after record profits and asset expansion

• Tech giants expect usable quantum computer to arrive this decade

Join the Conversation!

Our X is always active. You’ll love it. Go follow.

We'd love to hear your thoughts and comments. Join our community and stay updated with the latest trends and discussions in crypto.

Twitter | Instagram | Telegram Channel | Linkedin | Facebook