Digital Money and Real Competition: How Stablecoins Are Changing the Banking Game

When Facebook announced the launch of Libra in 2019, the global financial system reacted with unwarranted fear. The prevailing thought was that stablecoins were the “end” for traditional banks. The logic was simple: if people could store digital money directly on their phones with minimal fees and 24/7 access, who would need deposit accounts at all? However, as recent research and real-world data over the past few years show, the story is much more complex.

The Myth of “Deposit Outflows”: What Real Data Shows About Stablecoins

The most interesting conclusion from Professor Will Cong’s academic research at Cornell University turned out to be paradoxical for skeptics: under proper regulation, stablecoins are not a threat to the banking system but rather a complement. Despite the explosive growth of the digital asset market, empirical data hardly records a mass withdrawal of funds from traditional deposits into digital wallets.

This finding significantly contradicts previous conspiracy theories about the collapse of the banking system. If stablecoins truly were an alternative, we would have already seen dramatic changes in deposit structures. Instead, stability persists: people continue to keep most of their funds through traditional channels.

Deposit Stickiness as an Economic Law: Why Stablecoins Don’t Replace Banks

To understand this phenomenon, we need to refer to the basic economics of the banking system. The traditional model is built on the principle of “stickiness” — almost all financial transactions go through a single node, which is the current account. These accounts are the center around which mortgages, credit cards, salaries, and other obligations revolve.

It is precisely because of this phenomenon, called “deposit stickiness,” that people do not switch to alternative solutions. They do not leave traditional banks not because deposits are highly profitable (often the opposite), but because the system is so integrated into their daily lives that transferring all operations to another service requires disproportionate effort.

Even with all their advantages, stablecoins cannot break this client-bank bond, which is maintained not by attractive conditions but by their continuous mutual dependence.

Competition as a Catalyst: How the Presence of Stablecoins Improves Banking Services

The paradox is that if stablecoins cannot serve as a universal substitute, they perform something no less valuable — a disciplining factor. The very existence of an alternative forces traditional institutions to raise their standards.

When banks realize that clients have an exit, they cease to be inert. They can no longer rest on old zero-interest rates. They are compelled to offer more competitive deposit terms. They must optimize their operational systems. The expansion of stablecoin offerings pushes banks to critically evaluate their own efficiency.

The result of this competition is not a zero-sum game where one player loses at the expense of another. On the contrary, increased competition fosters greater lending volumes and broader financial intermediation — ultimately increasing the prosperity of ordinary users. Stablecoins do not “shrink the pie”; they accelerate its growth.

Regulatory Framework of the GENIUS Act: How Regulation Protects Innovation in Stablecoins

Of course, new financial instruments require appropriate oversight. Because, in theory, if masses of people start withdrawing funds from reserves backing stablecoins, it could trigger a systemic crisis — so-called “bank runs” in digital form.

However, research indicates that these are not new risks. They are standard liquidity and counterparty risks that have existed for years in the traditional system. Proven methods for managing them already exist.

On July 18, 2025, U.S. President Donald Trump signed the GENIUS Act, establishing a legal framework for these new instruments. The law sets a clear requirement: stablecoins must be fully backed by cash, short-term U.S. Treasury bonds, or insured deposits. This means each digital asset unit has tangible backing.

This regulatory framework already addresses the main vulnerabilities identified by academic research. It protects against run and liquidity risks. Subsequently, the Federal Reserve and the Office of the Comptroller of the Currency (OCC) will translate these principles into practical regulatory rules, including operational risk assessments, custodial storage, and management of large reserves integrated with blockchain networks.

Atomic Clearing and Global Payments: Why Stablecoins Are Revolutionizing Payment Infrastructure

When we stop viewing stablecoins as a threat, their true potential will emerge. And it lies not just in 24/7 access but in a radically new way of moving value — “atomic clearing.”

The traditional international banking system is incredibly slow. Money can take several days to travel through multiple intermediaries before finally reaching the recipient’s account. Each transaction is a potential delay point; each intermediary — a fee.

Stablecoins change this equation. A blockchain transaction is instant, final, and irreversible. Days turn into seconds. This frees up enormous amounts of liquidity that traditionally get “stuck” in the corridors of the interbank system. For global businesses, this means cheaper and faster solutions. For ordinary users, it means a fairer remittance system.

Modern banks still rely on infrastructure developed decades ago, often written in COBOL. This presents a rare opportunity to upgrade this outdated architecture.

From Resistance to Adoption: How Banks Must Rethink Their Role in the Era of Stablecoins

History often repeats itself; we just don’t want to admit it. The music industry resisted digitalization for a time — from CDs to streaming. Initially, it saw only threats and profit loss. But eventually, it turned out that it not only survived but found new channels for distribution and revenue. The banking system faces a similar choice.

Traditional financial institutions can do two things: either continue resisting or find ways to turn this transformation into an advantage. The latter strategy appears more sensible.

The point is, banks already have one huge asset — they understand money. They understand risk, regulation, compliance. Their previous disadvantage was “slowness,” but now this can become an advantage in the stablecoin world, where trust and reliability are more valuable than speed alone.

When banks realize they can profit from “service quality” instead of “delays,” from avoiding gross fees for inefficiency, they will genuinely embrace this revolution. Stablecoins are not a threat to banks; they are allies in transforming the global financial system into what it has long been meant to be.

The Challenge of the U.S. System: Will the Dollar Be Updated or Replaced?

The U.S. faces a strategic dilemma. Either they take the lead in developing this technology, or they watch as the financial future is shaped in offshore jurisdictions.

The U.S. dollar remains the most popular monetary asset worldwide. But the supporting infrastructure is clearly outdated. The GENIUS Act offers a way to fix this: it transforms what was previously a “shadow” part of the financial system — decentralized currency — into a clearly regulated, transparent, and resilient part of the domestic U.S. infrastructure.

This is not just a law about technology. It’s a law about how the U.S. wants to define its place in the global financial system in the coming decades. Properly regulated stablecoins can give the American currency new vitality in the digital age.