Quick Breakdown
- Bitwise CIO Matt Hougan says banks should raise deposit rewards instead of fighting stablecoins.
- Stablecoins offer yields of up to 5%, far outpacing US bank savings rates.
- Banks are lobbying against stablecoin yields, citing risks to lending and market stability.
Hougan accuses banks of exploiting depositors while lobbying against stablecoin yields
Matt Hougan, Chief Investment Officer at Bitwise Asset Management, has urged US banks to rethink their approach to competition from stablecoins, arguing that better rewards for depositors would be a more effective strategy than lobbying against digital assets.
In a post on X on Tuesday, Hougan said local banks are worried about stablecoins because they have “abused depositors as a free source of capital for decades.”
Stablecoins vs. Banks: The Growing Clash
The remarks come after Citi warned that yield-bearing stablecoins could trigger significant deposit outflows from banks. Bloomberg also reported this week that smaller lenders, which rely heavily on deposits for lending, face rising pressure from stablecoins offering higher yields and faster transactions.
Hougan dismissed the idea that stablecoins would threaten lending markets, calling such fears “scare tactics” and “classic first-order thinking.” He argued that while banks may lend less if deposits fall, decentralized finance (DeFi) provides savers with alternative ways to supply credit directly.
“Yes, banks will provide less credit if they have fewer deposits. But instead, people with stablecoins will provide credit directly to borrowers through DeFi applications. Markets are amazing at solving problems,”
he said
Higher Yields for Savers
Stablecoins currently offer returns of up to 5% on some crypto platforms—well above the US average savings account rate of 0.6% and even higher than top high-yield bank accounts at around 4%, according to Bankrate data.
Hougan stressed that this shift benefits individual savers rather than harming the economy. “The loser here is bank profit margins. The winner here is individual savers. The economy will be just fine,” he said.
Banking Lobby Pushes Back
US banks have intensified efforts to curb stablecoin yields, recently lobbying Congress to close what they described as a regulatory “loophole” in the GENIUS Act. The crypto industry has pushed back, warning that tighter restrictions would stifle innovation while protecting banks’ dominance over consumer deposits.
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