The Impact of Offering Interest on Stablecoin Deposits: Citi Executive Warns of Potential Bank Outflows and Funding Cost Increases

Citi executive Ronit Ghose warned that offering interest on stablecoin deposits could lead to bank outflows similar to the 1980s money market fund trend. This shift could increase funding costs and credit prices for banks. A consultancy leader, Sean Viergutz, also highlighted potential trouble for the banking sector if consumers move to high-yield stablecoins. US banking groups are calling for regulations to prevent stablecoin issuers from paying interest, fearing deposit outflows. In response, the crypto industry argues for maintaining the current setup to support innovation and consumer choices. The US government supports the use of dollar-pegged stablecoins to uphold the US dollar’s position as a global reserve currency.

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