How Net Interest Margins Keep Banks Profitable

For context, US banks pay negligible interest to depositors. Banks then lend depositors’ money to corporations at a higher interest rate. The difference between lending and depositor interest rates is referred to as the net interest margin (NIM). Net interest margins are a crucial component of bank earnings. The higher the NIM, the greater the potential for earnings, subject to credit conditions and demand.

Why Yield-Bearing Stablecoins Threaten Traditional Banking

The evolution of a regulated stablecoin market, which offers significantly higher yields than interest on fiat currency deposits with banks, would shift deposits from TradFi to DeFi. US banks would lose their monopoly and…