Bitwise CIO: Banks Should Boost Rewards, Not Fear Stablecoins

Matt Hougan, Chief Investment Officer at Bitwise Asset Management, is calling out US banks for complaining about stablecoin competition instead of offering better returns to their ￰1￱ Takeaways: Bitwise CIO Matt Hougan says banks should raise deposit rates instead of blaming ￰2￱ argues stablecoins won’t kill lending, but will shift credit to DeFi and benefit ￰3￱ higher yields and lower fees, stablecoins are becoming a more attractive alternative to banks. “If local banks are worried about competition from stablecoins, they should pay more interest on deposits,” Hougan posted on X Tuesday , criticizing the long-standing banking model. “They’ve been abusing depositors as a free source of capital for decades.” Stablecoins Threaten Bank Deposits, Says Bloomberg Report His comments come in response to a recent Bloomberg article warning that stablecoins, especially those offering yields, could disrupt traditional banking by drawing away ￰4￱ to the report, community and regional banks, which rely heavily on customer deposits to issue loans, are especially vulnerable as they lack access to the wholesale funding markets used by bigger ￰5￱ piece echoed concerns raised by Citi last month , which claimed that yield-bearing stablecoins could trigger a flood of withdrawals from ￰6￱ parallel, banking lobbyists are pushing Congress to tighten stablecoin legislation, particularly targeting rules around yield offerings under the GENIUS ￰7￱ dismissed the fears, labeling the idea that stablecoins will kill local lending markets as “absurd.” While he acknowledged that fewer deposits may mean reduced lending from banks, he argued that capital won’t disappear, it will simply flow through alternative ￰8￱ scare articles about stablecoins destroying local lending markets are ￰9￱ local banks are worried about competition from stablecoins, they should pay more interest on deposits.

They're only worried because they've been abusing depositors as a free source of… ￰0￱ — Matt Hougan (@Matt_Hougan) September 9, 2025 “People with stablecoins will provide credit directly to borrowers through DeFi applications,” Hougan said. “The loser here is bank profit ￰10￱ winner here is individual ￰11￱ economy will be just fine.” Stablecoin platforms offering returns of up to 5% have become increasingly attractive as the average US savings account still yields only 0.6%, with the highest rates barely touching 4%, according to ￰12￱ accounting for inflation and bank fees, many consumers see their savings erode in real terms, a reality that pushes more savers toward crypto-based ￰13￱ of stablecoins also tout lower transaction costs, instant transfers, and no holding fees as key advantages over traditional ￰14￱ Banking Groups Push to Close Stablecoin Yield ‘Loophole’ Last month, several major US banking associations urged Congress to tighten new stablecoin regulations, warning that a gap in the GENIUS Act could allow issuers to skirt restrictions on paying interest to ￰15￱ Bank Policy Institute (BPI) said the law’s current wording leaves room for stablecoin issuers to offer yield indirectly through affiliated exchanges or other ￰16￱ BPI was joined by the American Bankers Association, Consumer Bankers Association, Independent Community Bankers of America, and the Financial Services ￰17￱ GENIUS Act, signed into law by President Donald Trump on July 18, bans issuers from directly paying interest or yield but does not explicitly prohibit related entities from doing so.

However, users holding Circle’s USDC on Coinbase or Kraken can earn returns, creating a competitive alternative to traditional savings accounts. Meanwhile, the crypto industry has warned that aggressive efforts by banks to limit stablecoin yields through regulation would stifle financial innovation and consumer choice.