Original title: (How Banks Learned To Stop Worrying And Love Stablecoins)
Written by: Christian Catalini, Forbes
Translated by: Peggy, BlockBeats

Editor's note: Whether stablecoins will impact the banking system has been one of the core debates over the past few years. However, as data, research, and regulatory frameworks become clearer, the answer is becoming more measured: stablecoins have not triggered a large-scale outflow of deposits; rather, under the real constraint of 'deposit stickiness', they have become a competitive force pushing banks to improve interest rates and efficiency.

This article reinterprets stablecoins from the perspective of banks. They may not be a threat but rather a catalyst that forces the financial system to renew itself.

The following is the original text:

In 1983, a dollar sign flashed on an IBM computer monitor.

Back in 2019, when we announced the launch of Libra, the global financial system's reaction was, to say the least, intense. The fear of an almost existential crisis stems from: once stablecoins can be used instantly by billions of people, will banks' control over deposits and payment systems be completely broken? If you can hold a 'digital dollar' that can be transferred instantly on your phone, then why would you keep your money in a checking account with zero interest, numerous fees, and essentially 'paused' on weekends?

At that time, this was a completely reasonable question. For years, the mainstream narrative has believed that stablecoins are 'taking away banks' jobs.' People worry that 'deposit outflows' are imminent.

Once consumers realize they can directly hold a form of digital cash backed by treasury-level assets, the foundation that provides low-cost funding to the U.S. banking system will rapidly collapse.

However, a recent rigorous research paper by Professor Will Cong of Cornell University shows that the industry may have panicked too early. By examining real evidence rather than emotional judgments, Cong offered an intuitive conclusion: under proper regulation, stablecoins are not destroyers of bank deposits but rather complementary to the traditional banking system.

'Sticky deposit' theory.

The traditional banking model is essentially a bet built on 'friction.'

As checking accounts are the only true hub for fund interoperability, any act of transferring value between external services almost always has to pass through the bank. The entire system's design logic is: as long as you don't use a checking account, operations will become more cumbersome—the bank controls the only bridge connecting the 'islands' that are disconnected in your financial life.

Consumers are willing to accept this 'toll' not because checking accounts themselves are superior, but because of the power of the 'bundling effect.' You put your money in a checking account not because it is the best place for funds, but because it is a central node: mortgages, credit cards, and direct deposit of salaries all connect and collaborate here.

If the assertion that 'banks are about to die' is indeed valid, we should already see a large amount of bank deposits flowing into stablecoins. But reality is not so. As Cong pointed out, despite the explosive growth in the market value of stablecoins, 'existing empirical studies have found almost no significant correlation between the emergence of stablecoins and the loss of bank deposits.' The friction mechanism remains effective. So far, the proliferation of stablecoins has not caused substantial outflows from traditional bank deposits.

It has been proven that warnings about 'massive deposit outflows' are more a result of panic rendering by existing stakeholders due to their own positions, ignoring the most basic economic 'physical laws' in the real world. The stickiness of deposits is an extremely powerful force. For most users, the convenience value of a 'package service' is too high, high enough that they won't simply transfer their life savings to a digital wallet for just a few extra basis points of yield.

Competition is a characteristic, not a system flaw.

But real change is also happening here. Stablecoins may not 'kill banks,' but it is almost certain that they will make banks uneasy and force them to improve. This study from Cornell University indicates that even the mere existence of stablecoins has already created a disciplinary constraint, forcing banks to no longer rely solely on user inertia but to start offering higher deposit rates and more efficient, refined operational systems.

When banks truly face a credible alternative, the costs of conservatism will rise rapidly. They can no longer assume that your funds are 'locked in' and will be forced to attract deposits at more competitive prices.

Within this framework, stablecoins will not 'make a smaller cake,' but will instead drive 'more credit issuance and broader financial intermediation, ultimately enhancing consumer welfare.' As Professor Cong stated: 'Stablecoins are not meant to replace traditional intermediaries but can serve as a complementary tool to expand the business boundaries that banks are already good at.'

It has been proven that the 'threat of exit' itself is a powerful driver for existing institutions to improve their services.

Regulatory 'unlocking.'

Of course, regulators have plenty of reasons to worry about so-called 'run risks'—that is, once market confidence is shaken, the reserve assets behind stablecoins may be forced to be liquidated, triggering a systemic crisis.

However, as the paper points out, this is not an unprecedented new risk, but rather a standard risk form that has long existed in financial intermediation activities, highly similar in nature to the risks faced by other financial institutions. We already have a complete set of mature frameworks for liquidity management and operational risk. The real challenge is not to 'invent new physical laws,' but to correctly apply existing financial engineering to a new technological form.

This is where the (GENIUS Act) plays a key role. By explicitly requiring that stablecoins must be fully backed by cash, short-term U.S. Treasury securities, or custodial deposits, the act imposes hard rules for safety at the institutional level. As the paper states, these regulatory guardrails 'seem to be able to cover the core vulnerabilities identified in academic research, including run risks and liquidity risks.'

This legislation sets a minimum legal standard for the industry—adequate reserves and enforceable redemption rights, but the specific operational details will be implemented by banking regulators. Next, the Federal Reserve and the Office of the Comptroller of the Currency (OCC) will be responsible for converting these principles into enforceable regulatory rules, ensuring that stablecoin issuers fully account for operational risks, the possibility of custody failures, and the complexities unique to large-scale reserve management and blockchain system integration.

On July 18, 2025 (Friday), U.S. President Donald Trump displays the (GENIUS Act) that he has just signed at a signing ceremony in the East Room of the White House.

Efficiency dividend.

Once we stop lingering in the defensive mindset of 'deposits being diverted,' the real upward space will emerge: the 'underlying plumbing' of the financial system itself has reached a stage that requires reconstruction.

The real value of tokenization is not just 7×24 availability, but 'atomic-level settlement'—achieving instant cross-border value transfer without counterparty risk, which is a long-standing issue that the current financial system has been unable to solve.

The current cross-border payment system is costly and slow, often requiring funds to circulate through multiple intermediaries for days before final settlement. Stablecoins compress this process into a single on-chain, irrevocable transaction.

This has profound implications for global capital management: funds no longer need to be trapped for days 'in transit' but can be allocated cross-border instantly, releasing liquidity that has long been occupied by the correspondent banking system. In the domestic market, similar efficiency gains also herald lower costs and faster merchant payment methods. For the banking industry, this is a rare opportunity to renew the traditional clearing infrastructure that has long relied on tape and COBOL.

Dollar upgrade.

Ultimately, the U.S. faces a binary choice: either dominate the development of this technology or watch the future of finance take shape in offshore jurisdictions. The dollar remains the most popular financial product globally, but the 'tracks' supporting its operation have clearly aged.

(GENIUS Act) provides a truly competitive institutional framework. It localizes this field: by bringing stablecoins within regulatory boundaries, the U.S. transforms the uncertainties originally belonging to the shadow banking system into a transparent and robust 'global dollar upgrade plan,' turning an offshore novelty into a core component of domestic financial infrastructure.

Banks should no longer be entangled in the competition itself but should begin to think about how to turn this technology into their advantage. Just like the music industry was forced to transition from the CD era to the streaming era—initially resisting, but ultimately discovering it was a gold mine—banks are resisting a transformation that will ultimately save them. When they realize they can charge for 'speed' instead of relying on profits from 'delays,' they will truly learn to embrace this change.

A New York University student downloads music files from the Napster website in New York. On September 8, 2003, the Recording Industry Association of America (RIAA) filed lawsuits against 261 individuals who shared music files through the internet; additionally, the RIAA issued over 1,500 subpoenas to internet service providers.