Stablecoins will not destroy the banking system; instead, they will become a competitive force that drives banks to improve efficiency. Research shows that under the constraint of deposit stickiness, stablecoins have not triggered massive deposit outflows, but rather forced banks to provide better interest rates and services, becoming a catalyst for the self-renewal of the financial system. This article is sourced from a piece written by Forbes and organized, translated, and authored by BlockBeats. (Previous summary: Visa has launched USDC stablecoin settlement in the United States, with two banks cooperating to break the weekend vacuum.) (Background information: Digital banks no longer rely on banks to make money; the real gold mine is in stablecoins and identity verification)

Table of Contents

• “Sticky Deposit” Theory
• Competition is a characteristic, not a system flaw.
• Regulatory “unlocking”
• Efficiency Bonus
• Upgrade of the US Dollar

Editor's Note:

Whether stablecoins will impact the banking system has been one of the core debates in recent years. However, as data, research, and regulatory frameworks become clearer, the answer is becoming more rational: stablecoins have not triggered large-scale deposit outflows; instead, under the real-world constraint of “deposit stickiness,” they have become a competitive force pressuring banks to improve interest rates and efficiency.

This article reinterprets stablecoins from the perspective of banks. It may not necessarily be a threat, but rather a catalyst that compels the financial system to renew itself.

The following is the original text:

In 1983, a dollar sign flashed on an IBM computer monitor.

Back in 2019, when we announced the launch of Libra, the global financial system's reaction was, to say the least, quite intense. The kind of near-existential crisis fear stemmed from this: once stablecoins can be used instantly by billions of people, will banks' control over deposits and payment systems be completely undermined? If you can hold a “digital dollar” that can be transferred instantaneously on your phone, why would you keep your money in a checking account with zero interest, numerous fees, and essentially “shut down” on weekends?

At that time, this was a completely reasonable question. For many years, the mainstream narrative has always believed that stablecoins are “taking away the jobs of banks.” People are worried that “the outflow of deposits” is imminent.

Once consumers realize that they can directly hold a form of digital cash backed by government bond-grade assets, the foundation that provides low-cost funding to the U.S. banking system will quickly collapse.

However, a rigorous research paper recently published by Professor Will Cong of Cornell University shows that the industry may have fallen into panic too early. By examining real evidence rather than emotional judgment, Cong presents an counterintuitive conclusion: under appropriate regulation, stablecoins are not the destroyers that siphon off bank deposits, but rather a complementary existence to the traditional banking system.

“Sticky Deposit” Theory

The traditional banking model is essentially a bet built on “friction.”

Since the checking account is the only true hub for the interoperability of funds, any action of transferring value between external services almost always has to go through the bank. The design logic of the entire system is that as long as you do not use the checking account, operations will become more complicated—the bank controls that only bridge connecting the “islands” that are separated in your financial life.

Consumers are willing to accept this “toll” not because the demand deposit account itself is superior, but because of the power of the “bundling effect.” You place your money in a demand deposit account not because it is the best place for funds, but because it serves as a central hub: mortgages, credit cards, direct salary deposits, all connect and operate together here.

If the assertion that “banks are about to disappear” is indeed valid, we should have already seen a significant flow of bank deposits into stablecoins. However, reality is not the case. As Cong pointed out, despite the explosive growth of stablecoin market value, “existing empirical research has found little evidence of a clear correlation between the emergence of stablecoins and the loss of bank deposits.” The friction mechanism remains effective. So far, the popularity of stablecoins has not caused a substantial outflow of traditional bank deposits.

It has been proven that warnings about a “massive outflow of deposits” are more a result of panic rendering by vested interests out of their own position, ignoring the most basic economic “physical laws” in the real world. The stickiness of deposits is an extremely powerful force. For most users, the convenience value of a “basket of services” is too high—so high that it is not enough for them to move their lifetime savings into a digital wallet just for a few additional basis points of return.

Competition is a characteristic, not a system flaw.

But real change is happening here. Stablecoins may not “kill banks,” but it is almost certain that they will make banks feel uneasy and be forced to improve. This study from Cornell University points out that even the mere existence of stablecoins constitutes a form of disciplinary constraint, forcing banks to no longer rely solely on user inertia, but to start offering higher deposit Intrerest Rates, as well as more efficient and refined operational systems.

When banks are truly faced with a credible alternative, the cost of conservatism rises rapidly. They can no longer take for granted that your funds are “locked in”, but are forced to attract deposits at more competitive rates.

Under this framework, stablecoins do not “make a small cake”; instead, they will promote “more credit issuance and broader financial intermediation activities, ultimately enhancing consumer welfare.” As Professor Cong stated, “Stablecoins are not intended to replace traditional intermediaries, but can serve as a complementary tool to expand the business boundaries that banks are already good at.”

It turns out that the “threat of exit” itself is a powerful incentive for existing institutions to improve their services.

“unlocking” in terms of regulation

Of course, regulators have ample reason to be concerned about the so-called “run risk” — that is, once market confidence wavers, the reserve assets backing stablecoins may be forced to be liquidated, which could trigger a systemic crisis.

However, as pointed out in the paper, this is not a new risk that has never been seen before, but rather a standard risk pattern that has long existed in financial intermediary activities, which is essentially highly similar to the risks faced by other financial institutions. We already have a complete set of mature response frameworks for liquidity management and operational risks. The real challenge is not to “invent new physical laws,” but to correctly apply existing financial engineering to a new technological form.

This is precisely where the “GENIUS Act” plays a critical role. By explicitly requiring that stablecoins must be backed by cash, short-term U.S. Treasury securities, or insured deposits, the legislation imposes strict regulations at the institutional level for safety. As stated in the paper, these regulatory safeguards “appear to cover the core vulnerabilities identified in academic research, including the risks of bank runs and liquidity risks.”

The legislation sets minimum statutory standards for the industry—adequate reserves and enforceable redemption rights, but the specific operational details are left to banking regulatory agencies for implementation. Going forward, the Federal Reserve and the Office of the Comptroller of the Currency (OCC) will be responsible for translating these principles into enforceable regulatory rules, ensuring that stablecoin issuers fully account for operational risks, the possibility of custody failures, and the complexities unique to large-scale reserve management and integration with blockchain systems.

On July 18, 2025 (Friday), U.S. President Donald Trump showcased the just-signed “GENIUS Act” during a signing ceremony in the East Room of the White House in Washington.

Efficiency Bonus

Once we stop dwelling on the defensive thinking of “deposit diversion”, the real upside potential will emerge: the “underlying pipeline” of the financial system itself has reached a stage where it must be restructured.

The true value of tokenization is not just 24/7 availability, but “atomic settlement”—realizing instant transfer of cross-border value without counterparty risk, which is a problem that the current financial system has long been unable to solve.

The current cross-border payment system is expensive and slow, with funds often needing to circulate among multiple intermediaries for several days before final settlement. Stablecoins compress this process into a single on-chain, ultimately irreversible transaction.

This has far-reaching implications for global fund management: funds no longer need to be stuck for days “in transit,” but can be transferred across borders instantly, releasing liquidity that is currently tied up in the agent banking system for a long time. In the domestic market, the same efficiency improvements also signal lower costs and faster payment methods for merchants. For the banking industry, this is a rare opportunity to update the traditional clearing infrastructure that has long relied on tape and COBOL to barely maintain.

upgrade of the dollar

Ultimately, the United States faces a binary choice: either lead the development of this technology or watch the future of finance take shape in offshore jurisdictions. The US dollar remains the world's most popular financial product, but the “rails” that support its operation have clearly aged.

The “GENIUS Act” provides a genuinely competitive institutional framework. It localizes the field: by incorporating stablecoins into the regulatory boundary, the United States transforms the originally unsettling factors belonging to the shadow banking system into a transparent and robust “Global Dollar Upgrade Program,” shaping a novel offshore entity into a core component of domestic financial infrastructure.

Banks should no longer get caught up in the competition itself, but should start thinking about how to transform this technology into their own advantage. Just like the music industry was forced to transition from the CD era to the streaming media era—initially resisting it, but ultimately discovering it was a gold mine—banks are resisting a transformation that will ultimately save them. When they realize that they can charge for “speed” instead of relying on profits from “delay,” they will truly learn to embrace this change.

A New York University student downloaded music files from the Napster website in New York. On September 8, 2003, the Recording Industry Association of America (RIAA) filed lawsuits against 261 file sharers who downloaded music files over the internet; in addition, the RIAA issued over 1,500 subpoenas to internet service providers.