Regulatory gridlock around stablecoins is not hurting crypto firms the most. Banks are actually the ones at greater risk. That is the warning from Colin Butler, executive vice president of capital markets at Mega Matrix.
Traditional financial institutions have already poured capital into digital asset infrastructure. JPMorgan built out its Onyx blockchain payments network. BNY Mellon launched digital asset custody. Citigroup tested tokenized deposits. But none of it can scale.
Banks Built the Infrastructure. Now They Are Stuck.
As Cointelegraph reported on X, Butler explained the core problem directly. General counsels are advising boards they cannot justify capital spending until lawmakers decide whether stablecoins are deposits, securities, or a standalone payment instrument. The investment is real. The deployment is frozen.
Crypto companies have operated in grey areas for years. They are used to ambiguity. Banks are not built that way. Compliance functions will not approve full deployment without a product classification, Butler noted.
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The yield gap makes things worse. Exchanges are paying 4% to 5% on stablecoin balances. The average US savings account? Under 0.5%. That is not a small difference. Depositors have moved for far less before.
Butler pointed to the 1970s money market fund shift as a historical parallel. Back then, the migration took years. Today, moving funds from a bank account to a stablecoin platform takes minutes. The infrastructure already exists. So does the motivation.
The Deposit Flight Nobody Is Talking About Yet
Fabian Dori, chief investment officer at Sygnum, offered a more measured view. A large-scale bank run into stablecoins is unlikely right now. Trust, regulation, and operational resilience still anchor institutional money. But he did not dismiss the pressure entirely.
Corporate clients, fintech users, and globally active firms already comfortable shifting liquidity across platforms are the most exposed. Once stablecoins get treated as productive digital cash rather than crypto trading instruments, Dori said, the competitive pressure on bank deposits becomes far more visible.
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There is another layer to this. US law currently prohibits stablecoin issuers from paying yield directly to holders. But exchanges can still offer returns through lending programs, staking, or promotional structures. That loophole exists right now.
Restricting Yield Could Push Capital Offshore Fast
If regulators close that gap with broader restrictions, capital does not disappear. It relocates. Synthetic dollar tokens like Ethena’s USDe generate yield through derivatives markets. Regulated stablecoins cannot match that. So money moves toward structures that operate with fewer consumer protections and less oversight.
Butler’s point here is sharp. Regulators chasing stricter yield controls could accelerate the exact offshore flows they are trying to prevent. Capital seeks returns. That does not stop because a rule changes.
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The stablecoin classification debate in Washington has dragged on. Banks are absorbing the cost of that delay in a way crypto firms simply are not. The infrastructure spend is already done. The question now is how long banks can carry that cost before the regulatory answer finally arrives.
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