Bank of America Moynihan: "Deposit outflows could reduce credit supply, potentially hurting small and medium-sized businesses."
- Editor's note
- ※ Explanation of terms
Stablecoin: A cryptocurrency whose value is pegged to fiat currency or safe assets such as the US dollar.
Money Market Mutual Fund (MMF): A fund that invests in short-term financial products, characterized by high liquidity and stability.
Reserves: Funds that banks deposit with the central bank to prepare for withdrawals.
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Official warning: "$6 trillion in deposits could be lost."
According to a Cointelegraph report today, Bank of America CEO Brian Moynihan said during an earnings conference call that interest-bearing stablecoins could absorb up to $6 trillion in deposits from the U.S. banking system if issuers were allowed to pay interest.
"There is a potential for a significant shift in bank deposits into these products," Moynihan said, citing research cited by the U.S. Treasury.
It operates with a structure similar to a money market fund.
He explained that the operation of interest-bearing stablecoins is fundamentally different from that of existing bank deposits.
"These products would operate more like money market mutual funds," he said, adding that the funds would be held in cash, central bank reserves, or short-term government bonds and would not be used for lending.
This means that unlike traditional bank deposits, which are used as a source of loans and provide credit to the economy, stablecoin collateral assets are invested only in safe assets, blocking the flow of funds to the real economy.
Concerns about a credit crunch for small and medium-sized enterprises
Moynihan warned that this exodus of deposits would have serious repercussions across the financial system.
"This type of deposit movement will reduce the size of bank deposits and weaken the ability to supply credit," he said, adding that "small and medium-sized enterprises, which rely more on bank loans than capital markets, will be hit particularly hard."
He also added that it could "result in higher overall borrowing costs," potentially putting pressure on interest rates to rise.
The debate over stablecoin regulation heats up.
This warning is noteworthy because it comes at a time when discussions on stablecoin regulation are in full swing in the United States.
Currently, the U.S. Congress is discussing legislation regulating the issuance and operation of stablecoins, and whether issuers can pay interest has emerged as a key issue.
The virtual asset industry argues for the approval of interest-bearing stablecoins, arguing that they would be more attractive to users, while traditional financial institutions maintain their opposition, arguing that they could threaten the stability of the banking system.
Financial experts say this statement reflects the concerns of major banks, and predict that this will lead to increased lobbying by banks during the future legislative process for stablecoin regulations.
Joohoon Choi joohoon@blockstreet.co.kr
