Even Crypto-Funded Research Affirms That Yield-Bearing Stablecoins Reduce Bank Deposits and Lending
A crucial policy question raised about stablecoins – particularly stablecoins that pay interest or economically equivalent rewards – is how they will affect demand for bank deposits. That question is important because, unlike stablecoins, deposits play a critical role in funding loans to consumers and businesses and supporting economic growth. Unsurprisingly, advocates for yield-bearing stablecoins have argued that the effect of stablecoin issuance and adoption on bank deposits will be minimal.
In support of that contention, a blog post from crypto investment firm Paradigm describes recent research that models the impact of stablecoin growth on bank deposits. The post asserts that “stablecoin adoption should be neutral…
