As Congress debates legislation on crypto market structure, one issue has emerged as particularly contentious: whether stablecoins should be allowed to earn yield.
On one hand, banks are struggling to protect their traditional hold on consumer deposits, which underpin much of the U.S. economy’s credit system. On the other hand, crypto industry players seek to pass on returns, or “rewards,” to stablecoin holders.
At first glance, this seems like a narrow question regarding a niche of the crypto economy. In reality, this goes to the heart of the American financial system. The fight for yield-bearing stablecoins isn’t really about stablecoins. It’s about deposits and who gets paid for them.
For decades, most consumer accounts in the United States have earned little or nothing for their owners, but that doesn’t mean the money has been sitting idle. Banks accept deposits and put them to good use: by lending, investing and earning returns. What consumers received in exchange was security, liquidity, and convenience (bank runs do occur but are rare and mitigated by the FDIC’s insurance regime). What the banks receive is most of the economic gains generated by these balances.
This model has been stable for a long time. Not because it is inevitable, but because consumers had no realistic alternative. With new technologies, this is changing.
A change in expectations
The current legislative debate over stablecoin yield is more a sign of a deeper shift in how people expect money to behave. We are moving towards a world in which balances should win by default, not as a special feature reserved for savvy investors. The return becomes passive rather than opt-in. And increasingly, consumers expect to capture a greater share of the returns generated by their own capital rather than seeing them absorbed upstream by intermediaries.
Once this expectation is established, it will be difficult to limit yourself to cryptocurrencies. This will extend to any digital representation of value: tokenized cash, tokenized treasuries, on-chain bank deposits, and eventually tokenized securities. The question is no longer “should stablecoins yield returns?” and becomes something more fundamental: why should consumer sales bring in nothing at all?
This is why the stablecoin debate seems existential for the traditional banking sector. This is not a new asset competing with deposits. This is about challenging the principle that deposits should, by default, be low-yielding instruments whose economic value accrues primarily to institutions rather than individuals and households.
The credit objection and its limits
Banks and their allies respond with a serious argument: if consumers earn a return directly on their balances, deposits will leave the banking system, thereby starving the economy of credit. Mortgages will become more expensive. Small business loans will decline. Financial stability will suffer. This concern deserves to be taken seriously. Historically, banks have been the main channel through which household savings are transformed into credit for the real economy.
The problem is that the conclusion does not follow the premise. Allowing consumers to capture yield directly does not eliminate the need for credit. This changes the way credit is financed, priced and governed. Instead of relying primarily on opaque balance sheet transformation, credit increasingly flows through capital markets, securitized instruments, pooled lending vehicles, and other explicit financing channels.
We’ve seen this pattern before. The growth of money market funds, securitization and non-bank lending has sparked warnings of a credit collapse. This is not the case; it has just reorganized itself.
What is happening now is another such transition. Credit does not disappear when deposits are no longer silently rehypothecated. It is moving toward systems where risk and return appear more clearly, where participation is more explicit, and where those who bear the risk get a proportionate share of the reward. This new system does not mean less credit; this means credit restructuring.
From institutions to infrastructure
It is not a single product that makes this change sustainable, but the emergence of a financial infrastructure that modifies default behavior. As assets become programmable and balances more portable, new mechanisms allow consumers to retain custody of them while continuing to earn returns according to defined rules.
Vaults are an example of this broader category, alongside automated allocation layers, yield-generating wrappers, and other ever-evolving financial primitives. What these systems have in common is that they make explicit what has long been opaque: how capital is deployed, under what constraints and for whose benefit.
Intermediation does not disappear in this world. Rather, it moves from institutions to infrastructure, from discretionary balance sheets to rules-based systems, and from hidden spreads to transparent allocation.
This is why calling this change “deregulation” is not relevant. The question is not whether intermediation should exist, but rather WHO and where should benefit.
The real political question
Seen clearly, the stablecoin yield debate is not a niche conflict. This is a foretaste of a much broader reflection on the future of the deposits. We are moving from a financial system in which consumer balances earn little, intermediaries capture most of the earnings, and credit creation is largely opaque, to one in which balances are expected to earn, returns flow more directly to users, and infrastructure increasingly determines how capital is deployed.
This transition can and must be shaped by regulation. Rules regarding risk, disclosure, consumer protection and financial stability remain absolutely essential. But the debate over stablecoin yield should not be understood as a decision about crypto, but as a decision about the future of deposits. Policymakers can attempt to protect the traditional model by limiting who can deliver returns, or recognize that consumer expectations are shifting toward direct participation in the value generated by their money. The former can slow change at the margins. It won’t reverse it.
