Francis Chung/Bloomberg
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The fight feels existential. But it obscures a more important shift already underway. The real competitive threat to U.S. banks is not stablecoin yield itself, but the steady rise of
Yield can attract deposits, but utility determines where deposits ultimately stay. The focus on yield is misplaced. By treating interest as the primary determinant of where deposits ultimately settle, banks are at best buying time by constraining one acquisition vector without addressing the forces that actually determine where customers keep their money.
Even when standalone high-interest savings products succeed in attracting balances, they rarely become primary financial relationships. By contrast, platforms built around utility integrate payments, treasury, cards, and workflow, and increasingly attract and retain operating balances not because they pay more interest, but because they remain functionally central to how money is earned, spent, and managed. Paychecks are deposited there. Bills are paid from there. Cards, credit lines and investment accounts are linked there. Switching costs are behavioral and operational, not financial.
Restricting stablecoin yield addresses only one acquisition mechanism. Financial platforms can still attract users through insured yield equivalents, trading and investing products, cheaper cross-border payments, or superior integration. Limiting one pathway may buy time at the margin, but it does not alter the underlying shift toward platforms that retain customers through utility.
One area where stablecoins substitute bank deposits most clearly is in emerging markets, and notably, they do so even without paying yield. In economies marked by inflation, currency volatility, capital controls, or weak trust in financial institutions, the utility is the dollar itself. Dollar-denominated stablecoins are adopted as savings tools, remittance rails, and stores of value not because they offer interest, but because they provide access to a stable monetary unit.
The lesson is not geographic. It is structural. Utility drives adoption and retention; yield is only one possible modifier, and its importance varies by use case and context. If utility is what anchors deposits over time, the competitive battlefield shifts away from interest rates and toward the interface layer where financial experiences are actually defined.
This matters because the financial center of gravity is moving. Over time, deposits tend to follow the platform that defines how money is used, not the institution that merely holds it. Historically, banks owned both. Today, that linkage is breaking.
Consumer wallet apps and fintech platforms are rapidly evolving into full-stack financial operating systems. They combine payments, investing, lending, global transfers and increasingly sophisticated cash management into a single, intuitive experience. For many users, these platforms now feel more like a financial home than a checking account ever did.
These platforms win not by paying higher yield, but by offering faster settlement, simpler onboarding, better design and tighter integration across financial activities. They iterate quickly, bundle services seamlessly and meet customers where they already are. Stablecoins, when used at all, simply reduce friction in the background. They are infrastructure, not the value proposition.
The same dynamic is now playing out in business banking. Small and midsize businesses increasingly prioritize speed, transparency and global reach. Faster acceptance, cheaper cross-border payments, real-time visibility into cash positions and flexible treasury tools matter more than marginal differences in deposit rates. Operating balances often migrate first, quietly and incrementally, long before headline deposit data shows stress.
By the time deposits visibly move, the customer relationship has already shifted. Banks have seen this movie before. They lost primacy in remittances. Then in peer-to-peer payments. Then in retail trading and investing. In each case, banks retained the balance sheet initially, but lost engagement, pricing power and cross-sell opportunities. The pattern is consistent: fragmentation, followed by reaggregation around nonbank platforms that control the user experience.
Deposit erosion follows functionality, not fear. If banks continue to frame the competitive threat as a regulatory problem, they risk repeating the mistake. Regulation may constrain individual products, but it does not stop consumers or businesses from gravitating toward better financial tools. A checking account protected by inertia is not a strategy. It is a grace period.
None of this means banks must “embrace stablecoins” to remain relevant. That framing misses the point. Stablecoins are not the strategic question. Differentiation is.
Banks still have powerful advantages: trust, scale, credit expertise, local relationships and deep integration with the real economy. But those advantages only matter if they are expressed through competitive products and services. Relationship banking, lending expertise, community presence and integrated advisory offerings are durable moats. A checking account with a debit card is not.
The risk facing U.S. banks is not that stablecoins will suddenly siphon deposits through yield alone. It is that deposits will gradually follow utility as financial experiences improve elsewhere. Banks are not being disintermediated by interest rates. They are being outcompeted on usefulness.