Citigroup executives warn that stablecoin yields could lead to bank deposit outflows.

Citigroup's future finance head Ronit Ghose warned in a report that the payment of interest on stablecoin deposits could lead to a bank deposit outflow, similar to the boom of money market funds in the 1980s.

According to the Financial Times, Ghose compared this to the rise of money market funds in the late 1970s to early 1980s. At that time, these funds grew from about $4 billion in 1975 to $235 billion in 1982, surpassing banks that were strictly regulated in terms of interest rates. According to Federal Reserve data, from 1981 to 1982, bank account withdrawals exceeded new deposits by $32 billion.

PwC's Sean Viergutz also believes that consumers turning to high-yield stablecoins could impact the banking industry. He stated, 'Banks may face higher funding costs, or respond by raising deposit rates, which could lead to increased credit costs for households and businesses.'

American banks oppose stablecoin yields.

The GENIUS Act does not allow stablecoin issuers to pay interest to holders, but it does not impose a ban on crypto exchanges or related institutions. This regulatory arrangement has sparked a strong reaction from the banking industry.

A banking group led by the American Bankers Association urged local regulators to close the so-called loopholes that may indirectly allow stablecoin issuers to pay interest or yields. In a recent letter, they stated that this could disrupt the flow of credit to U.S. businesses and households, potentially triggering a $6.6 trillion loss of traditional bank deposits.

Dissatisfaction in the crypto industry.

The crypto industry has rebutted the banks' concerns, with two industry organizations urging lawmakers to reject proposals to close the 'loopholes'. They warned that amendments would favor traditional banks and stifle innovation and consumer choice.

The U.S. government is a major force supporting the adoption of dollar stablecoins. Treasury Secretary Scott Bessent stated that the U.S. government will use stablecoins to ensure the dollar continues as the global reserve currency.