Omid Malekan, an adjunct professor at Columbia Business School, told lawmakers on Monday that Congress should prioritize consumers over banks when settling stablecoin market-structure rules, arguing that many yield concerns are myths, as he stated. He said the debate now hinges on whether stablecoin issuers may share reserve yields with third parties.
A key dispute centers on who earns interest from stablecoin reserves. Banking groups have called this a “loophole” and warned of deposit flight, a point technologist Paul Barron explained.
Malekan listed counterarguments to the banking case and noted stablecoins can raise bank activity because issuers hold Treasuries and deposits. He added that stablecoin competition may cut bank profits but not lending, and that national average savings yields sit near 0.62% according to BankRate (Ed. note: that rate is unusually low).
He also argued that large money-center banks face greater exposure than community banks and said restricting yield sharing protects bank profits at savers’ expense. “The only reason this myth persists is because it’s pushed by an unholy alliance of large banks trying to protect their profits and crypto startups trying to sell smaller banks their services.”
John Deaton reminded senators that the banking lobby pressures lawmakers not to allow third-party platforms to pay stablecoin yield, writing “The banks are not your friends. And neither are career politicians […] who support them.”
Coinbase has reportedly warned it may withdraw support for the CLARITY Act if the bill restricts stablecoin rewards beyond disclosure rules.
