Stablecoins and Banks: When Competitive Pressure Becomes a Catalyst for Innovation

The question that has dominated the debate in recent years remains seemingly simple: will stablecoins destroy the traditional banking system? However, empirical data tell a different story from the alarmist narrative that characterized the early years of this technology.

According to meticulous research by Professor Will Cong of Cornell University, stablecoins have not triggered the expected “massive deposit run” from traditional financial institutions. Instead, they highlight how the banking system operates on principles far more solid than superficial observers have feared. This does not mean that stablecoins are harmless — it means their true impact operates on a completely different level.

The Foundation of “Deposit Loyalty”

The contemporary banking model rests on a rarely explicitly articulated principle: inertia. Banks do not attract your funds because they offer the best storage service, but because they represent the central node around which the entire financial life is organized. Mortgages, credit cards, salaries, recurring payments — everything converges in that checking account.

Users tolerate high fees and insufficient yields not by conscious choice, but because the cost of disintermediation exceeds the benefit. Deposit loyalty functions like a documented physical force: despite the explosion of market capitalization of stablecoins, no clear correlation with significant outflows from traditional banks is observed.

The reason is simple: for most depositors, the value of the “integrated platform” — where everything they need resides — is so high that no additional percentage of yield justifies abandoning the established banking ecosystem.

Competition as a Driver of Self-Improvement

It is precisely at this point that the true catalyst for change emerges. Stablecoins do not “kill” banks but force them to deeply reevaluate their services. The mere existence of a credible alternative dramatically raises the cost of institutional inertia.

When banks recognize that deposits are no longer “frozen” by inertia but available for instant transfer to alternative instruments, the competitive dynamic reverses. They can no longer rely on captivity: they must now offer a sufficiently attractive price (in terms of yield, efficiency, speed, convenience) to retain funds.

This mechanism of competitive discipline produces a counterintuitive effect according to the research: rather than reducing financial intermediation, stablecoins amplify it. Banks, stimulated by the “exit threat,” tend to expand credit offerings, improve operational quality, and innovate in services — dynamics that directly benefit consumers.

The Regulatory Framework as a Foundation of Stability

Regulatory authorities have valid reasons for caution regarding systemic risks — particularly the potential “bank run” risk if confidence falters. However, as highlighted by the Cornell University study, this is not a new or unprecedented phenomenon in financial engineering.

The “GENIUS Act” addresses this issue through an explicit framework: stablecoins must remain fully backed by cash, short-term U.S. government securities, or insured deposits. These regulatory constraints are calibrated on standards proven in the rest of financial intermediation.

The Federal Reserve and the Office of the Comptroller of the Currency will translate these principles into operational regulations, specifically addressing custodian failure risks, reserve management protocols, and integration with blockchain infrastructure. It is not about “inventing new economic physics,” but about applying established banking discipline to a new technological form.

The Opportunity of Infrastructure Reconversion

Once the defensive mindset of “deposit preservation” is abandoned, the genuine value of tokenization emerges: the “atomic cross-border settlement.” The current international payment system remains costly and slow, with transactions taking days to settle through multiple intermediaries.

Stablecoins compress this process into a single on-chain operation, definitive and irreversible. Capital remains in perpetual motion, eliminating liquidity locked in banking correspondent channels. Even domestically, merchants perceive tangible benefits in speed and transaction costs.

For banking institutions, this presents a rare opportunity to modernize regulation infrastructures built with now obsolete technologies. Upgrading is not optional — it is a matter of structural competitiveness.

The Strategic Choice of the Dollar

The United States now faces a clear bifurcation: lead the evolution of this technology or watch as the finance of the future crystallizes in offshore jurisdictions. The dollar remains the most widespread financial product in the world, but the “infrastructures” supporting it clearly reveal their age.

The “GENIUS Act” represents a strategic “localization” attempt: by incorporating stablecoins within transparent and solid regulatory boundaries, the United States transforms potential risk factors into a “global dollar upgrade solution” that is coherent and verifiable. What was marginal becomes an integral part of the national financial architecture.

Banks should not perceive this evolution as a competitive threat to be avoided. Rather, they should recognize the opportunity for transformation: just as the music industry transitioned from CDs to streaming (initially with reluctance, then discovering new profitability models), the banking sector faces an evolution that will not destroy it but reinvent it.

The true catalyst for future prosperity lies in the ability to monetize “speed” rather than “friction.” When financial institutions internalize this logic, they will finally learn to embrace the change that will save them.