Stablecoins break through traditional payment barriers, and banks and regulators are caught in a battle of interests.

Stablecoins are becoming a key variable in payment systems, not just a topic within the crypto community, but a deep issue involving trillions of dollars in deposits, banks’ lending capacity, and even future control over payment infrastructure. By 2025, the total interest-free transaction deposits in U.S. banking reach $6.6 trillion, about one-third of all commercial bank deposits. If a large portion of these funds flow into stablecoin platforms, the traditional banking deposit base will face a real impact, affecting credit issuance and the stability of the entire financial system.

Currently, banks, exchanges, and regulators are engaged in intense battles over the positioning, regulatory framework, and return mechanisms of stablecoins. Behind this contest is a struggle over who will control the critical infrastructure of the future payment system. Stablecoins appear like currency, capable of quick transfers, but their regulatory status is ambiguous, giving them room to bypass traditional banking systems—while also planting the seeds of risk.

Why Stablecoins Pose a Real Threat to Bank Deposits

The threat from stablecoins does not come from consumers but from large-scale transfers of corporate and institutional funds. Corporate payment accounts have been the primary source of bank funds for decades, but now this segment is starting to flee.

First, in the realm of international trade. Some large corporations have begun using dollar stablecoins for offshore inventory procurement—recipients can immediately convert these stablecoins into local currency, avoiding multiple intermediaries in traditional international remittances. The efficiency gains are significant, eliminating lengthy processes that once required multiple bank steps.

The remittance market has also become a new battleground for stablecoins. Last fall, a major remittance service provider announced the launch of a USD payment token, directly competing with traditional remittance channels. The core of this competition is infrastructure—not hype—where stablecoins are positioned as fast channels for funds, bypassing existing inefficiencies. For enterprises, the cost savings are highly attractive.

From the banks’ perspective, this means companies no longer need to keep large cash reserves in checking accounts waiting for remittances. They can transfer into stablecoins on demand and convert back to fiat when needed. This flexibility challenges the traditional assumption of deposit stability—banks have long relied on customer inertia, assuming deposits remain stable because customers are reluctant to move funds. If this inertia disappears, the entire bank’s financial model could change.

Three Paths Banks Are Taking to Respond to Stablecoins and Their Practical Challenges

In response to the impact of stablecoins, different reactions are emerging within the banking industry. Large banks are actively taking the lead, while small and mid-sized banks and credit unions are more defensive, trying to protect their existing deposit bases.

Broadly, banks have three options:

First: Issue their own stablecoins or tokenized deposits. This can be done independently or through alliances. Large banks have the technical and capital resources to develop their own, but most banks consider this too costly to do alone. Alliance models are more feasible but still challenging—requiring coordination on technical standards, risk management, and regulatory compliance across multiple institutions.

Second: Transition into a true crypto bank. This path carries the highest risk, requiring a complete overhaul of traditional business models. Only leading institutions deeply involved in crypto are willing to attempt this; most traditional banks cannot afford such a strategic shift.

Third: Offer “deposit and withdrawal” services. This is the most pragmatic approach—banks act as intermediaries between stablecoins and fiat currency, helping clients easily move funds into stablecoins or back into fiat. It’s akin to setting up highway entrances on existing payment networks—retaining customer relationships while adapting to new payment trends.

Across all paths, compliance is fundamental. Regulators are continuously monitoring security, fund compliance, anti-money laundering, and other issues, raising barriers to entry. Some large crypto banks are planning to go public and raise $400 million, indicating growing market recognition of compliant stablecoin platforms.

How Regulators Are Addressing Passive Returns on Stablecoins

Regulatory debates around stablecoins have escalated to the congressional level. The core issue in Washington is whether stablecoin balances can earn interest or returns.

The 2026 Market Structure Act (the version passed by the Senate committee) plans to include a clause effectively banning trading platforms from offering passive interest or rewards on stablecoin holdings. This directly conflicts with platform business interests. Before the vote, Coinbase withdrew support for the bill and publicly stated that “stablecoin rewards” have become an inviolable bottom line.

Proponents of restricting stablecoin returns emphasize the risk of “deposit drain”—whenever stablecoins offer over 3% returns, they can siphon off billions of dollars from traditional banks. Opponents see this as an attack on consumer choice, arguing platforms and users should have the right to higher yields.

The complexity of this confrontation lies in the bill’s deeper implications. The over 300-page document not only addresses limits on stablecoin returns but also involves tokenized equity, DeFi regulation, and the division of authority among different regulators. Some large commercial banks have expressed “extreme concern” about the bill, fearing broad impacts on tokenization and the stablecoin ecosystem.

Recent drafts show lawmakers are attempting compromises—banning fully passive returns but not entirely ruling out reward mechanisms. This means platforms might still be able to offer certain incentives under strict limits. Both banks and exchanges are pushing amendments to steer policies in their favor.

The Real Challenges of Stablecoins in Retail and Commercial Applications

In theory, stablecoins should be the best choice for consumers—high yields, fast transfers, cross-border convenience. But in practice, retail adoption remains extremely limited.

For consumers, high-yield stablecoin products (some platforms offering up to 3.5%) are positioned as alternatives to low-interest bank accounts. However, legal barriers are rising. Before tighter regulation, consumers already face technical risks—losing private keys in self-custody wallets means permanent loss of funds, which is unacceptable for ordinary users.

Retail transaction volumes do exist but are “very small.” Most people still prefer to keep wages and daily savings in traditional banks, and a slightly higher yield alone isn’t enough to change decades-old savings habits. The consensus for 2026 and beyond is that stablecoins will not generate scalable retail use cases.

In business scenarios, stablecoins face different challenges. Although cross-border payments are theoretically cheaper, processing costs, system integration issues, and additional risk management expenses often offset the savings. For merchants, the promised cost reductions are often just theoretical; practical engineering problems diminish the advantages.

This indicates that current stablecoin applications are limited to specific scenarios—international trade, remittances, large inter-company transfers—rather than mass consumer use.

The Future of Stablecoins: Pragmatic Expectations and Deep Structural Changes

Considering current market conditions, regulatory trends, and usage challenges, a pragmatic outlook on stablecoin future is necessary.

In the foreseeable future, consumer savings behavior will not fundamentally change because of stablecoins. Payroll checks will not flow directly into stablecoin accounts, and daily payments will still primarily be in fiat. But this does not mean stablecoins lack a market—they serve as an “optimization tool.” For example, automated AI agents could transfer part of savings into stablecoins for higher yields and convert back to fiat as needed. While technically complex, this automation could be key to breaking the inertia of bank deposits.

Once such liquidity flows become large-scale, the assumption of deposit stability in banks will be challenged. Even a small proportion could pressure funding costs and credit availability. This explains why banks, regulators, and exchanges are fiercely contesting the definition and control of stablecoins.

Long-term, banks’ strategies are clear: participate via custodial services, alliances, or direct issuance of stablecoins, rather than passive withdrawal. Regulators are trying to balance—allowing stablecoins to foster payment innovation while limiting their impact on traditional banking. Exchanges aim to maintain stablecoin appeal—high yields are crucial.

For ordinary users, the ultimate concern is that stablecoins operate safely, maintain liquidity, and continue to exist. From this perspective, 2026 will be a critical turning point. Whether regulatory frameworks are established, whether banks can effectively participate, and whether stablecoins can find sustainable business models—these answers will determine whether stablecoins evolve from fringe innovation to a mainstream payment system. The story of stablecoins is far from over; it is entering a decisive phase.