Michaela
Summary: Why is Ronit Ghose warning about high-yield stablecoins?
Citi’s Ronit Ghose warned that offering interest on stablecoins could cause large withdrawals from banks, similar to the surge of money market funds in the 1980s. This shift could raise banks’ funding costs, leading to higher borrowing expenses for households and businesses. Experts caution that widespread movement toward high-yield stablecoins may disrupt the traditional banking sector and credit markets.
Ronit Ghose, Global Head of Citi’s Future of Finance division, has cautioned that offering interest on stablecoin holdings could prompt significant bank withdrawals, echoing the 1980s money market fund surge, and potentially raising funding costs and credit rates.
According to a report by the Financial Times, Ghose drew parallels between potential outflows from interest-paying stablecoins and the surge in money market funds during the late 1970s and early 1980s. Adding to the concern, Sean Viergutz, a banking and capital markets advisory lead at PwC, warned that a migration of consumer funds toward higher-yielding stablecoins could pose significant risks for the traditional banking sector.
Ghose warned that banks might encounter increased funding costs if they turn to wholesale markets or raise deposit rates, a scenario that could drive up borrowing expenses for both households and businesses.
Ghose’s warnings about higher funding costs for banks add context to the ongoing debate over stablecoin regulations, emphasizing the potential strain on traditional banking if interest-bearing crypto products gain traction.
The GENIUS Act bars stablecoin issuers from offering interest to holders but does not restrict crypto exchanges or related businesses, prompting concerns from the banking sector.
US banking groups, led by the Bank Policy Institute, have urged regulators to close what they see as a loophole that could allow indirect interest payments, warning it might trigger $6.6 trillion in deposit outflows and disrupt credit for businesses and households.
The crypto industry has pushed back, arguing that tightening the rules would favor traditional banks and hinder innovation, even as the US government continues to support dollar-pegged stablecoin adoption.
Stablecoins Shift Could Ripple Through SHIB Market
For SHIB holders, these developments could have indirect but meaningful implications for the market. As investors pursue higher yields from stablecoins, they may rebalance their crypto portfolios, potentially reducing exposure to tokens like SHIB and affecting its trading volume and overall demand.
Over time, such shifts could influence price dynamics and liquidity in the SHIB market, particularly if a significant portion of the crypto community reallocates capital toward interest-bearing stablecoins.
This scenario spotlights how broader regulatory changes and market trends in the crypto sector can ripple across altcoins, impacting investor behavior, market confidence, and even adoption rates, even when a token is not directly involved in stablecoin products.
Read More
- Japan Set to Launch First Yen-Backed Stablecoin This Fall
- JD.com and Ant Group Push for Yuan-Backed Stablecoins in Global Power Play
- Ripple Pushes for U.S. Bank Status Under Fresh Stablecoin Regs
Michaela has no crypto positions and does not hold any crypto assets. This article is provided for informational purposes only and should not be construed as financial advice. The Shib Magazine and The Shib Daily are the official media and publications of the Shiba Inu cryptocurrency project. Readers are encouraged to conduct their own research and consult with a qualified financial adviser before making any investment decisions.
