BlockRiver Blog | Banks Concede on Stablecoin Yields: What It Signals for Unregulated Brokers

The strategic context is straightforward. Banks are lobbying for outright bans on stablecoin yields, arguing that $6.6 trillion in deposits are at risk of flight. They may even succeed, the GENIUS Act, signed into law in July 2025, prohibits direct stablecoin yields while permitting reward payments. But this distinction is increasingly academic. As Nic Puckrin argues in American Banker, banning yield won't protect the status quo banks are fighting for. It will push demand beyond regulators' reach.

The historical parallel is instructive. In the 1950s, Regulation Q capped deposit interest rates, pushing dollars offshore into what became known as the Eurodollar market. By the mid-1980s, there were more eurodollars than dollars. London bankers, with support from the Bank of England and the British treasury, invented Eurodollars as USD-denominated credit instruments not subject to US regulation, in particular Regulation Q, which capped the interest rates payable on onshore dollar deposits. The pattern repeated in the 1970s: money market mutual funds arose in the 1970s when market interest rates were higher than the rates that commercial banks were permitted to pay on their deposits, spurring the growth of investment alternatives outside of banks. The first MMMF was established in 1972. The number of funds grew to 36 in 1975, 90 in 1980, and 649 in 1990. Despite heavy bank lobbying, money market funds now hold over $7.71 trillion in assets.

Stablecoins are writing the same chapter. The total stablecoin market capitalization has grown by 49% in 2025, going from $205 billion in January to $306 billion at the end of November. The stablecoin sector climbed +48.9% annually to hit a record $311.0 billion. For context, total deposits at all US commercial banks stood at $18.7 trillion as of December 2025. Stablecoins remain a fraction of the deposit base, but their growth trajectory and the regulatory capitulation it has triggered tell a different story about where infrastructure is heading.

On July 18, 2025, the President signed the GENIUS Act into law. The GENIUS Act is the most significant United States law affecting the digital assets industry to date. The law creates reserve requirements for coin issuers similar to rules that ensure banks hold enough assets to cover their liabilities, meaning firms that issue stablecoins must back their digital offerings one-for-one with liquid assets like US dollars or short-term Treasuries. Regulations are required to be promulgated by July 18, 2026, one year following the GENIUS Act's enactment.

This matters because the regulatory infrastructure that seemed perpetually "coming soon" now has statutory deadlines and agency rulemaking underway. The FDIC Board of Directors approved a notice of proposed rulemaking to implement the GENIUS Act's application provisions. The Act allows insured depository institutions to issue payment stablecoins through a subsidiary and to engage in certain related activities. The compliance architecture is being built in real time, not by startups promising future solutions, but by federal regulators implementing enacted law.

The implications for unregulated brokers are direct. The traditional path to market access, build or acquire a license, develop custody solutions, construct settlement infrastructure, assumes a multi-year horizon and seven-figure capital outlay before the first compliant trade executes. But if the banking industry is publicly acknowledging that the competitive dynamics have already shifted, the calculus changes. The question is no longer whether regulated digital asset infrastructure will exist, but whether you're positioned to access it before your competitors do.

Stablecoins offer structural advantages that banks cannot replicate within their current operating model: T+0 settlement, 24/7 availability, dramatically lower cross-border payment costs. These aren't theoretical benefits, they're operational realities already serving institutional flows. Stablecoin-based B2B payments surged from under $100 million monthly in early 2023 to over $6 billion by mid-2025. The infrastructure layer has graduated from proof-of-concept to production scale.

The risk, of course, is that stablecoins still lack federal deposit protection and face ongoing regulatory refinement. The GENIUS Act establishes a framework, not a finished state. Compliance burdens will shift as rulemaking proceeds through 2026 and beyond. But this is precisely why waiting for "perfect" timing misreads the competitive landscape. The brokers who enter now through existing regulated infrastructure will have operational experience and client relationships when the regulatory framework matures. Those who wait will face both the compliance learning curve and the competitive disadvantage of late entry.

What American Banker's concession reveals is not that banks are giving up, they will continue lobbying, and the GENIUS Act's yield provisions may yet be revisited in follow-on legislation. What it reveals is that the fundamental competitive dynamic has already been decided by market structure, not by regulatory intervention. Demand for dollar-denominated, blockchain-native settlement rails exists at institutional scale. Regulated pathways to serve that demand are being built by federal agencies with statutory mandates.

For unregulated brokers, the strategic question is no longer whether to pursue compliant market access, but how quickly. The infrastructure moat that seemed to guarantee years of runway has been bridged by legislative action and agency implementation. The choice now is between accessing that infrastructure while it remains differentiated, or building licensing in-house while your competitors are already operating.