As Congress debates crypto market structure legislation, one issue has emerged as particularly contentious: whether stablecoins should be allowed to pay returns.
On the one hand, you have banks fighting to protect their traditional hold over consumer deposits that underpin much of the American economy’s credit system. On the other hand, crypto industry players seek to pass on returns or “rewards” to stablecoin holders.
On its face, this looks like a narrow question about a niche in the crypto economy. In fact, it goes to the heart of the American financial system. The battle for yield-bearing stablecoins is not really about stablecoins. It is about deposits and who gets them paid out.
For decades, most consumer balances in the U.S. have earned little or nothing for their owners, but that doesn’t mean the money has been standing still. Banks take deposits and put them to work: lending, investing and earning returns. What consumers have received in exchange is safety, liquidity and convenience (bank runs do happen, but are rare and mitigated by the FDIC insurance scheme). What the banks receive is the bulk of the financial upside generated by these balances.
That model has been stable for a long time. Not because it is inevitable, but because consumers had no realistic alternative. With new technology, that is now changing.
A shift in expectations
The current regulatory debate over stablecoin dividends is more indicative of a deeper shift in how people expect money to behave. We are moving towards a world where balances are expected to serve as standard, not as a special feature reserved for sophisticated investors. Yield becomes passive rather than opt-in. And increasingly, consumers expect to get more of the returns generated by their own capital, rather than having them absorbed upstream by intermediaries.
Once that expectation kicks in, it will be hard to limit yourself to crypto. It will extend to any digital representation of value: tokenized cash, tokenized government bonds, onchain bank deposits, and ultimately tokenized securities. The question stops being “should stablecoins pay returns?” and becomes something more fundamental: why should consumer balances earn nothing at all?
This is why the stablecoin debate feels existential to traditional banking. It is not about one new asset competing with deposits. It is about challenging the premise that deposits must be low-interest instruments as standard, whose financial value primarily accrues to institutions rather than individuals and households.
The credit objection and its limits
Banks and their allies respond with a serious argument: If consumers profit directly from their balances, deposits will leave the banking system and starve the credit economy. Mortgages are getting more expensive. Lending to small businesses will shrink. Financial stability will suffer. This concern deserves to be taken seriously. Historically, banks have been the primary channel through which household savings are converted into credit for the real economy.
The problem is that the conclusion does not follow the premise. Allowing consumers to capture dividends directly does not eliminate the need for credit. It changes how credit is financed, priced and managed. Instead of relying primarily on opaque balance sheet transformation, credit increasingly flows through capital markets, securitized instruments, pooled lending instruments and other explicit financing channels.
We’ve seen this pattern before. The growth of money market funds, securitization and non-bank lending led to warnings that credit would collapse. It didn’t; it’s just reorganized.
What is happening now is another such transition. Credit does not disappear when deposits are no longer put on hold. It moves into systems where risk and return are more clearly visible, where participation is more explicit, and where those who bear risk capture a corresponding share of the reward. This new system does not mean less credit; this means a restructuring of the credit.
From institutions to infrastructure
What makes this shift sustainable is not a single product, but the emergence of financial infrastructure that changes default behavior. As assets become programmable and balances more portable, new mechanisms allow consumers to retain custody while still earning returns under defined rules.
Vaults are an example of this broader category, along with automated allocation layers, dividend-bearing wrappers, and other ever-evolving financial primitives. What these systems share is that they make explicit what has long been opaque: how capital is deployed, under what constraints and for whose benefit.
Mediation does not disappear in this world. Rather, it moves from institutions to infrastructure, from discretionary balance sheets to rules-based systems, and from hidden spreads to transparent allocation.
That’s why framing this shift as “deregulation” misses the point. The question is not whether there should be mediation, but on the contrary WHO and where to benefit from it.
The real political question
Clearly, the stablecoin dividend debate is not a niche dispute. It is a foretaste of a much larger account of the future of deposits. We are moving from a financial system where consumer balances earn little, intermediaries capture most of the upside, and credit creation is largely opaque to one where balances are expected to earn, returns flow more directly to users, and infrastructure increasingly determines how capital is used.
This transition can and should be shaped by regulation. Rules around risk, disclosure, consumer protection and financial stability remain absolutely necessary. But the stablecoin dividend debate is best understood not as a decision about crypto, but as a decision about the future of deposits. Policymakers may try to protect the traditional model by limiting who can offer returns, or they may recognize that consumer expectations are shifting toward direct participation in the value their money generates. The former can slow down the change in margins. It won’t reverse it.
