The Wall Street Journal writes on "Why Banks Are on High Alert About Stablecoins." They tell us, "Stablecoins are poised to become a part of the mainstream financial system, and banks are on high alert about how the cryptocurrency could threaten their business. The House voted 308-​122 Thursday to pass a bill that spells out some ground rules for stablecoins, which function as digital dollars in the wider crypto world. The Genius Act is now headed to President Trump, who has indicated he would sign it. A major issue for banks is whether stablecoin issuers will lure away customer deposits. A Treasury Department report in April estimated that stablecoins could lead to as much as $​6.​6 trillion in deposit outflows, depending in part on whether issuers could offer yields similar to bank accounts." The piece says, "​For now, stablecoins are mainly used to trade in and out of other cryptocurrencies. But a regulatory framework could encourage broader use.... Stablecoin issuers such Circle and Tether earn revenue by investing the money people pay for tokens in cash-​like assets such as Treasurys that pay yields. Coinbase CEO Brian Armstrong has argued that token-​holders should get some of the interest issuers receive on those assets. The Genius Act prohibits stablecoin issuers from paying interest or yield to holders. Some lawyers and lobbyists say that may not stop issuers and their partners from finding ways to induce customers to hold stablecoins." The Journal adds, "Another concern is that stablecoins could lead to higher amounts of uninsured deposits at banks. If a customer takes money out of a Federal Deposit Insurance Corp.-​backed account and buys a stablecoin, the issuer of that coin might end up putting the customer'​s money back in a bank account -- albeit a higher-​balance account that is above the $​250,​000 limit for deposit insurance. A shift by consumers away from holding money in traditional bank deposits could have broad economic implications as well.... Big banks, in particular, hope to cash in on stablecoins, by managing stablecoin reserves and serving as a middleman between issuers and the world of fiat currencies. Megabanks also recently started to consider whether to jointly launch their own stablecoin through a consortium, to fend off competition as big tech and retail companies eye the space. Walmart, Amazon and other multinational giants have recently explored whether to issue their own stablecoins in the U.​S., The Wall Street Journal previously reported."

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