Banking Giants Panic as Stablecoin Innovation Gains Ground
America’s traditional banking industry is scrambling to protect its turf as yield-bearing stablecoins continue to gain traction, posing a formidable challenge to the financial status quo.
According to Austin Campbell of New York University, the banking industry is already panicked about how blockchain technology could disrupt their work.
In a post from May 21 titled “The Empire Lobbies Back,” Campbell said U.S. banks are using their political power to stop progress in the industry and ensure they make profits by using fractional reserve banking which offers little return to the average person.
NYU Professor Slams Banking Lobby Pressure
As Campbell declared in his letter, “Banks ask you to defend their power so they can keep taking advantage of your voters. It’s obvious that this is a blatant effort to win help from the cartels. The main reason for this growing tension? Stablecoins are entering the market that actually pay stakers which traditional banks have not done with customer deposits, even though they profit from those funds.”
According to Campbell, preventing consumers from using interest-bearing stablecoins is harmful and against their wishes, so he urged legislators not to give in to the wishes of the banking cartel. His remarks take place as the market for stablecoins is expanding past the simple dollar-pegged types.
In February, Figure Markets was in the news because the Securities and Exchange Commission (SEC) approved its YLDS token the first regulated stablecoin with earning potential which gave its holders a steady 3.85% return.
New Stablecoins Offer Interest and Innovation
Similarly, other innovators are getting involved as well. Through Pi Protocol, Reeve Collins’ latest project, USP can be minted for USI, which pays earned interest to its owners. In addition, Spark Protocol’s stablecoin USDS pays interest by using decentralized lending platforms and tokenized U.S. Treasurys.
Sam MacPherson, the CEO of Spark Protocol developer Phoenix Labs, believes that zero-interest stablecoins are no longer up to date. “Being paid less than the risk-free rate by keeping your stablecoins is not tolerable,” he told Bloomberg.
Besides earning interest, stablecoins are making a big impact on global payment systems. According to Lucas Matheson, CEO of Coinbase Canada, more stablecoin transactions happen every day than what Visa can deal with.
Ever since testifying to Congress in April 2023, Campbell has repeatedly suggested that not regulating stablecoins might lead those companies to form overseas, holding back U.S. innovation and aiding rivals from other countries.
With lawmakers considering how to proceed with digital assets, Campbell warns that shutting consumers out of finance and locking its future in the hands of the old guard could result from not protecting competition and choice.
