A "catfish" in the banking aquarium? What the data really reveals about stablecoins and deposits

When Donald Trump signed the “GENIUS Act” on July 18, 2025, one thing became clear: the debate over whether stablecoins would destroy the banking system is no longer speculation but evidence. And the surprise is disconcerting: it’s not the case.

For years, the financial industry acted as if stablecoins were predators of bank deposits. The narrative was simple but frightening: if millions of people could transfer “digital dollars” instantly from their mobile devices, why would they keep money in accounts that barely earn interest, charge fees, and practically hibernate on weekends? It seemed logical that a massive outflow was inevitable.

But rigorous research by Professor Will Cong of Cornell University has uncovered something more interesting: under proper regulation, stablecoins are not enemies of banks but a competitive force that forces them to evolve.

The secret of the “glue” in finance

The traditional banking system was built on something fundamental: friction. A checking account is not just a place to store money; it’s the central node connecting your mortgage, your credit card, your payroll—all in one platform. Consumers accept this model not because it’s superior but because it’s convenient—changing banks means disconnecting an entire ecosystem of services.

Data shows something revealing: although the market value of stablecoins has grown exponentially, there is no significant correlation between their adoption and bank deposit outflows. The “glue” that keeps money in traditional banks is stickier than financial doomsayers imagined.

The reason is simple but decisive. For most users, the cost of dismantling an entire network of interconnected services just to gain a few basis points of extra yield is too high. Stablecoins have not triggered the mass migration predicted because the banking system is no longer sustained solely by inertia but by integration.

The threat of change (which is actually an opportunity)

Here’s the real phenomenon: although stablecoins do not kill deposits, they almost certainly bother banks—and that discomfort is exactly what the financial system needed.

The mere existence of a credible alternative changes everything. Banks can no longer assume that your money is “prisoner.” When a viable option with higher speed, lower friction, and better returns appears, the cost of complacency skyrockets. Banks begin to respond with more competitive interest rates and more efficient services.

This competitive effect does not shrink the financial pie; it expands it. According to analysis from Cornell University, stablecoins act as a “complementary tool” that expands available credit and improves financial intermediation. The system does not contract—it is pushed toward excellence.

The regulatory framework as a catalyst

Fears of a “bank run” triggered by loss of confidence in stablecoins are not unfounded, but they are not new either. These risks—liquidity, custody, trust—already exist in traditional financial intermediation, and we have mature frameworks to manage them.

The “GENIUS Act” does not reinvent the laws of financial physics. Instead, it applies proven financial engineering to a new technology. The law requires stablecoins to be fully backed by cash, U.S. Treasury bonds short-term, or insured deposits. This regulatory barrier precisely closes the weak points identified by academic research: the run risk, liquidity risk, and operational transparency.

With these requirements in place, the Federal Reserve and the Office of the Comptroller of the Currency can now translate legal principles into enforceable rules that consider custody, the complexity of maintaining large reserves, and the connection to blockchain systems.

Where true efficiency shines

Beyond defensive panic over deposits, the upward potential is monumental. The real benefit of tokenization is not just 24/7 availability but something deeper: “atomic settlement”—the instant transfer of value without counterparty risk, a problem that the international financial system has left unresolved for decades.

Today, an international transfer takes days to settle, crossing multiple intermediaries and generating significant costs. Stablecoins compress this process into a single irreversible blockchain transaction. Money no longer gets “trapped” in transit for days; it is instantly reallocated across borders, freeing liquidity that the correspondent banking system has artificially retained.

In domestic payments, the effect is equally transformative: faster, cheaper, and more secure transactions for merchants. For banking, it represents the opportunity to modernize a clearing infrastructure that has long been maintained with temporary patches and legacy code.

The future of the digital dollar

The United States faces a clear choice: lead the evolution of this technology or watch it develop in offshore jurisdictions outside its control. The dollar remains the most desired financial product in the world, but its “carrier infrastructure” is visibly aging.

The “GENIUS Act” changes the game. By regulating stablecoins within the U.S. perimeter, it localizes what was offshore uncertainty and makes it a central component of the national financial infrastructure. The novelty becomes institutional.

Banks will eventually realize that it’s not about resisting competition but using it to renew themselves. Like the music industry that initially rejected streaming but ultimately discovered an expanded business model, banking will find that it can thrive not by charging for “friction” but for “speed.” When that mindset shift occurs, stablecoins and traditional banks will not be enemies but partners in modernizing the global financial system.