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The Stablecoin Choice
The passage this year of the GENIUS Act raised the stakes for banks by creating a regulatory framework for potential competition — a fast and cheaper way to move money using stablecoin backed by the U.S. dollar. Retailers such as Walmart and Amazon.com will have good reason to push customers to use stablecoins to avoid hefty credit card processing fees that cut into their profits.
Bank customers may also want to use payment stablecoin, even though issuers can’t offer a yield. If a customer wants to move money, stablecoins won’t take four days to settle and cost $55 in fees. Instead, stablecoins can do that in 12 seconds at less than 25 cents, said Sara Krople, a partner in audit and assurance at Crowe. She appeared this week in Bank Director and FinXTech’s webinar, “What Banks Must Know About Stablecoins,” hosted by Executive Editor Jackie Stewart.
Businesses with significant cross-border currency exchange risk may prefer U.S. payment stablecoins. Since they’re pegged to the U.S. dollar, they’ll be less exposed to currency fluctuations, said Bank Director Senior Advisor Sal Inserra, who also appeared on the webinar. Even wire transfers for real estate purchases may be vulnerable to competition from stablecoin. “Wire [fee] income and merchant processing fees are definitely at risk,” he said. Also, if certain customers move a lot of deposits into stablecoin, transaction accounts — typically the bank’s lowest cost deposits — could be depleted.
Banks may not have a choice whether to engage with stablecoins. Inserra encouraged banks to figure out which customers are most likely to use payment stablecoins, such as manufacturers with large overseas exposure. Banks should assess their options and the infrastructure they have.
Most community banks are unlikely to want to issue a stablecoin, but they could hold reserve assets such as U.S. Treasuries or dollars. They could offer their customers tokenized deposits to keep money from flowing out of the bank. If they have trust services, they could allow customers to hold stablecoins. Bankers and directors can spend time learning more about the changing environment and how they might be impacted. “You’re going to have to make a decision,” Inserra says, making a reference to a song by the band Rush. “If you choose not to decide, you still have made a choice.”
• Naomi Snyder, editor-in-chief for Bank Director
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