Citigroup executive warns that stablecoin interest payments could lead to a drain on bank deposits

He warned that paying interest on stablecoin holdings could lead to a drain on bank deposits similar to the money market fund (MMF) boom of the 1980s.
On the 25th (local time), the Financial Times reported that Ronit Ghose, head of future finance at Citi,
Ghose compares the potential outflows of funds due to stablecoin interest payments to the money market phenomenon of the late 1970s and early 1980s.
He compared it to the rapid growth of money market funds, which exploded from about $4 billion in 1975 to $235 billion in 1982, at a time when bank deposit rates were tightly regulated.
During that period, they surpassed banks: Between 1981 and 1982, withdrawals from bank accounts exceeded new deposits by $32 billion, according to Federal Reserve data.
Sean Wiergatz, head of banking and capital markets advisory at consulting firm PwC, also believes consumer funds will move into high-yield stablecoins.
"Banks may need to rely more on wholesale markets or raise deposit rates, which could lead to higher credit costs for households and businesses," he said.
Currently, the GENIUS Act in the United States prohibits stablecoin issuers from offering interest rates, but does not apply to exchanges or partners. This regulatory structure leaves the banking industry vulnerable to
They fear potential deposit outflows and disruptions to credit flows and are urging regulators to prevent this. Some institutions have warned that up to $6.6 trillion in deposits could flow out of the traditional banking system.
Meanwhile, the cryptocurrency industry has pushed back against the banking sector's concerns, warning that the proposed changes could favor traditional banks and stifle innovation and consumer choice.