The fight over stablecoin yield isn't really about stablecoins

Source: CryptoNewsNet Original Title: The fight over stablecoin yield isn’t really about stablecoins Original Link: https://cryptonews.net/news/finance/32330723/ As Congress debates crypto market structure legislation, one issue has emerged as especially contentious: whether stablecoins should be allowed to pay yield.

On one side, you have banks fighting to protect their traditional hold over consumer deposits that underpin much of the U.S. economy’s credit system. On the other side, crypto industry players are seeking to pass on yield, or “rewards,” to stablecoin holders.

On its face, this looks like a narrow question about one niche of the crypto economy. In reality, it goes to the heart of the U.S. financial system. The fight over yield-bearing stablecoins isn’t really about stablecoins. It is about deposits, and about who gets paid on them.

For decades, most consumer balances in the United States have earned little or nothing for their owners, but that doesn’t mean the money sat idle. Banks take deposits and put them to work: lending, investing, and earning returns. What consumers have received in exchange is safety, liquidity, and convenience (bank runs happen but are rare and are mitigated by the FDIC insurance regime). What banks receive is the bulk of the economic upside generated by those balances.