As Congress debates legislation on cryptocurrency market structure, a particularly contentious question has arisen: whether stablecoins should be allowed to pay yield.
On the one hand, there are banks struggling to protect their traditional control over the consumer deposits that underpin much of the U.S. economy’s credit system. On the other hand, crypto industry players seek to pass on performance or “rewards” to stablecoin holders.
At first glance, this seems like a narrow question about a niche of the crypto economy. In reality, it goes to the heart of the American financial system. The fight for yield-generating stablecoins is not really about stablecoins. It’s all about deposits and who gets paid for them.
For decades, most consumer scales in America have generated little or nothing for their owners, but that doesn’t mean the money sat idle. Banks accept deposits and put them to work: they lend, invest and earn returns. What consumers have received in return is security, liquidity and convenience (bank runs do occur but are rare and are mitigated by the FDIC insurance regime). What the banks receive is the majority of the economic benefit generated by these balances.
That model has remained stable for a long time. Not because it is inevitable, but because consumers had no realistic alternative. With new technologies, that is changing.
A change in expectations
The current legislative debate over the performance of stablecoins is rather a sign of a deeper shift in how people expect money to behave. We are moving towards a world where winning balances are expected by default, not as a special feature reserved for sophisticated investors. Performance is becoming passive rather than voluntary. And increasingly, consumers expect to capture a greater share of the returns generated by their own capital rather than having it absorbed up front by intermediaries.
Once that expectation takes hold, it will be difficult to limit yourself to cryptocurrencies. It will extend to any digital representation of value: tokenized cash, tokenized Treasuries, on-chain bank deposits, and eventually tokenized securities. The question stops being “should stablecoins pay yield?” and it becomes more fundamental: why should consumers’ balances generate nothing at all?
This is why the debate over stablecoins seems existential for traditional banking. It is not about a new asset competing with deposits. It is about questioning the premise that deposits should, by default, be low-yielding instruments whose economic value falls primarily on institutions and not on individuals and households.
Credit objection and its limits
Banks and their allies respond with a serious argument: if consumers earn returns directly on their balances, deposits will leave the banking system, starving the economy of credit. Mortgages will become more expensive. Loans to small businesses will be reduced. Financial stability will be affected. 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 performance directly does not eliminate the need for credit. It changes the way credit is financed, priced and governed. Rather than 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 prompted warnings that credit would collapse. It was not like that; It was simply reorganized.
What is happening now is another such transition. Credit does not disappear when deposits are no longer quietly remortgaged. It is relocated to systems where risk and return come to the surface more clearly, where participation is more explicit, and where those who take the risk get a proportionate share of the reward. This new system does not mean less credit; It means a restructuring of credit.
From institutions to infrastructure
What makes this change lasting is not a single product, but the emergence of a 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 are an example of this broader category, along with automated allocation layers, yield-generating wrappers, and other still-evolving financial primitives. What these systems share 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.
That’s why framing this change as “deregulation” doesn’t make sense. The question is not whether intermediation should exist, but rather WHO and where you should benefit from it.
The real political question
Put clearly, the debate over stablecoin performance is not a niche dispute. It is a preview of a much broader analysis of the future of deposits. We are moving from a financial system in which consumers’ balances generate little, middlemen capture most of the profits, and credit creation is largely opaque, to one in which balances are expected to generate profits, returns flow more directly to users, and infrastructure increasingly determines how capital is deployed.
This transition can and should be determined by regulation. Regulations on risk, disclosure, consumer protection and financial stability remain absolutely essential. But the debate over stablecoin performance is best understood not as a decision about cryptocurrencies, but as a decision about the future of deposits. Policymakers can try to protect the traditional model by limiting who can deliver performance, or they can recognize that consumer expectations are shifting toward direct participation in the value their money generates. The former can slow the change in the margins. It won’t reverse it.
