The Stablecoin Yield Fight Is Really About Your Bank Account

While Congress debates whether stablecoins should pay yield, a $18 trillion question lurks beneath the surface: Why should your money earn nothing while banks profit from it? What looks like a narrow crypto regulation fight is actually reshaping the fundamental relationship between consumers, their deposits, and who gets paid.

The battle lines seem clear. Traditional banks want to protect their hold over consumer deposits that underpin much of the U.S. economy's credit system. Crypto players like Coinbase and Circle want to pass 4-5% annual yields to stablecoin holders. But this framing misses the bigger transformation already underway.

The Deposit Model That's Breaking Down

For decades, most American bank accounts earned practically nothing for their owners. Your $10,000 checking account might earn $1 per year while the bank lends that money out at 6-8% interest rates. The implicit deal was simple: you got safety, liquidity, and convenience in exchange for banks capturing most of the economic upside from your capital.

This model persisted not because it was inevitable, but because consumers had no realistic alternative. New technology is changing that calculation.

When Tether holders can earn 5.2% on their dollar-pegged tokens while traditional savings accounts offer 0.45%, the contrast becomes impossible to ignore. The question isn't whether this will disrupt banking—it's how quickly and in what form.

A Shift in What Money Should Do

The legislative debate over stablecoin yield signals a deeper shift in how people expect money to behave. We're moving toward a world where balances are expected to earn by default, not as a special feature reserved for sophisticated investors. Yield is becoming passive rather than opt-in.

Once that expectation takes hold, it won't stay confined to crypto. It will extend to tokenized cash, tokenized Treasuries, onchain bank deposits, and eventually tokenized securities. The question stops being "should stablecoins pay yield?" and becomes something more foundational: why should consumer balances earn nothing at all?

This explains why the stablecoin debate feels existential to traditional banking. It's not about one new asset competing with deposits. It's about challenging the premise that deposits should, by default, be low-yield instruments whose economic value accrues primarily to institutions rather than individuals.

The Credit Objection and Its Limits

Banks respond with a serious argument: if consumers earn yield directly on their balances, deposits will flee the banking system, starving the economy of credit. Mortgages will become more expensive. Small-business lending will shrink. Financial stability will suffer.

This concern deserves attention. Historically, banks have been the primary channel through which household savings transform into credit for the real economy. But the conclusion doesn't follow the premise.

Allowing consumers to capture yield directly doesn't eliminate the need for credit—it changes how credit gets funded, priced, and governed. Instead of relying on opaque balance-sheet transformation, credit increasingly flows through capital markets, securitized instruments, pooled lending vehicles, and other explicit funding channels.

We've seen this pattern before. The growth of money-market funds, securitization, and nonbank lending prompted similar warnings that credit would collapse. It didn't; it just reorganized.

From Institutions to Infrastructure

What makes this shift durable isn't any single product, but the emergence of financial infrastructure that changes default behavior. As assets become programmable and balances more portable, new mechanisms allow consumers to retain custody while earning returns under defined rules.

Vaults represent one example of this broader category, alongside automated allocation layers, yield-bearing wrappers, and other evolving financial primitives. What these systems share is making explicit what has long been opaque: how capital gets deployed, under what constraints, and for whose benefit.

Intermediation doesn't disappear in this world. Rather, it moves from institutions to infrastructure, from discretionary balance sheets to rule-based systems, and from hidden spreads to transparent allocation.

That's why framing this shift as "deregulation" misses the point. The question isn't whether intermediation should exist, but who should benefit from it and where.

The Real Policy Question

The stablecoin yield debate isn't a niche dispute—it's a preview of a much larger reckoning about the future of deposits. We're transitioning from a financial system where consumer balances earn little, intermediaries capture most upside, and credit creation remains largely opaque, to one where balances are expected to earn, yield flows more directly to users, and infrastructure increasingly determines how capital gets deployed.

This transition can and should be shaped by regulation. Rules around risk, disclosure, consumer protection, and financial stability remain essential. But policymakers face a choice: protect the traditional model by limiting who may offer yield, or recognize that consumer expectations are shifting toward direct participation in the value their money generates.

The former may slow change at the margins. It won't reverse it.