"Blocking stablecoin profits is about protecting banks, not consumers," US professor criticizes lobbying.

Columbia University Professor Debunks 'Stablecoin Myth': "Bank Lobbying Is Hindering Consumer Benefits"

The US banking industry has been criticized for spreading "false myths" about the profitability of stablecoins and protecting its own industry. Professor Omid Malekan, who teaches cryptocurrency at Columbia Business School, emphasized that "Congress should prioritize consumers over profitable banks."

Professor Malek-An stated on Monday via X (formerly Twitter) that he was “disappointed that the passage of the market structure bill is being delayed due to the issue of stablecoin revenue,” adding that “most of the concerns circulating in Washington are nothing more than unfounded myths.” He argued that “for now, the passage of the cryptocurrency market structure bill may depend on whether stablecoin issuers can share revenue with third parties.”

Banks' real concern is deposit outflow.

The core of the controversy is the "revenue bottleneck"—who receives the "interest income" generated from stablecoin reserves? Some major banks and banking lobbying groups are calling for this loophole to be closed. Technology analyst Paul Baron explained, "Their concern is that if users receive a risk-free return of around 5% per year through stablecoins, they will experience a massive outflow of deposits, a phenomenon known as 'deposit flight.'" The argument is that this could threaten the liquidity of local community banks.

Stablecoins may increase deposits, not reduce them.

However, Professor Malek-An pointed out that these concerns are far from the truth. "The idea that the proliferation of stablecoins will lead to a decline in deposits is a myth," he said. "In fact, the structure of stablecoins, which attract significant foreign demand, requires issuers to hold reserves in the form of US Treasury bonds or deposits, which could lead to an increase in overall banking activity."

He also said, "The argument that stablecoins negatively impact bank lending is unconvincing," adding, "Banks should simply offer higher interest rates to their users." Indeed, the current average interest rate on savings accounts in the US is a mere 0.62%.

Stablecoin adoption poses a greater threat to large banks.

Professor Malek-An argued that "currently, it's not regional banks, but large 'money center' banks that feel the greatest threat from the spread of stablecoins." He analyzed that "these false myths are being spread by large banks to protect their profits, and some crypto startups are piggybacking on this trend to sell their technological services to regional banks."

“For a healthy economy, we need to consider the interests of depositors as well as borrowers,” he said. “Preventing stablecoin issuers from sharing profits with users ends up limiting depositors’ interests instead of protecting banks’ profits.”

Congress must prioritize innovation and consumers.

Professor Malek-An's message to Congress was clear: "We must prioritize technological innovation and consumer protection, not protect the profit-maximizing big banks." He emphasized, "Most of the concerns raised by the banking industry are unsubstantiated. Congress has historically prioritized progress over corporate interests, and we must stop now."

Meanwhile, attorney John Deaton, running for Senate, criticized the banking lobby for exerting pressure on Congress, saying, "Banks are not your friends, and neither are the career politicians who support them." Deaton also hinted at a possible shift in Congress' stance, stating that Coinbase is considering withdrawing its support for the CLARITY Act if it includes a cap on stablecoin interest rates.

The recent debate goes beyond simple discussions of financial products, revealing a sharp conflict of interest between the cryptocurrency industry, traditional financial institutions, and consumers. It remains to be seen how the institutionalization of stablecoins will impact the competitiveness of cryptocurrencies in the United States.

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TP AI Precautions

This article was summarized using a TokenPost.ai-based language model. Key points in the text may be omitted or inaccurate.

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