Stablecoins will not destroy the banking system; instead, they will become a competitive force that drives banks to improve efficiency. Research shows that under the constraints of deposit stickiness, stablecoins have not triggered large-scale deposit outflows, but have instead forced banks to offer better interest rates and services, becoming a catalyst for the self-renewal of the financial system. This article is based on a piece written by Christian Catalini, organized, translated, and authored by BlockBeats. (Previous summary: BNP Paribas and 10 European banks are promoting the Qivalis Euro stablecoin, with plans to launch in the second half of 2026) (Background Supplement: Deutsche Bank's “EURAU” Euro stablecoin goes live: Obtained dual certification from MiCA and Germany, will the European payment landscape be rewritten?)

Table of Contents

• “Sticky Deposit” Theory
• Competition is a characteristic, not a system defect.
• Regulatory aspect of “unlocking”
• Efficiency Bonus
• Upgrade of the US Dollar

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, quite intense. The fear of an almost existential crisis was that: once stablecoins could be used instantly by billions of people, would banks' control over deposits and payment systems be completely undermined? If you could hold a “digital dollar” in your phone that could be transferred instantaneously, why would you still keep your money in a checking account with zero interest rates, numerous fees, and essentially “stopped” on weekends?

At that time, this was a perfectly reasonable question. For many years, the mainstream narrative has always believed that stablecoins are “taking the banks' jobs.” People are worried that “deposit outflows” are imminent.

Once consumers realize that they can directly hold a type of digital cash backed by government bond-grade assets, the foundation that provides low-cost funding to the U.S. banking system will quickly collapse.

However, a rigorous research paper recently published by Professor Will Cong of Cornell University shows that the industry may have fallen into panic too early. By examining real evidence rather than emotional judgments, Cong presents a counterintuitive conclusion: under proper regulation, stablecoins are not the destroyers that deplete bank deposits, but rather a complementary existence to the traditional banking system.

“Sticky Deposit” Theory

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

Since a checking account is the only true hub for the interoperability of funds, almost any action to transfer value between external services must go through the bank. The design logic of the entire system is that as long as you do not use a checking account, operations will become more complicated; the bank controls that only bridge connecting the fragmented “islands” in your financial life.

The reason consumers are willing to accept this “toll” is not because of the superiority of the demand deposit account itself, but because of the power of the “bundling effect.” You put your money in a demand deposit account not because it is the best place for funds, but because it serves as a hub: mortgages, credit cards, and direct salary deposits all connect and operate in coordination here.

If the assertion that “banks are about to disappear” is indeed valid, we should have already seen a large amount of bank deposits flowing into stablecoins. However, this is not the case in reality. 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 popularity of stablecoins has not caused substantial outflows from traditional bank deposits.

It has been proven that warnings about “massive outflows of deposits” are more often the result of panic-driven exaggeration by vested interests, 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 “basket of services” is too high—so high that they would not simply transfer their life savings into a digital wallet just for a few extra basis points of return.

Competition is a characteristic, not a system flaw.

But real change is 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 points out that even the mere existence of stablecoins has already constituted a kind of disciplinary constraint, forcing banks to no longer rely solely on user inertia, but to start offering higher deposit Intrerest Rates and more efficient, more refined operating systems.

When banks truly face a credible alternative, the cost of conservatism rises rapidly. They can no longer assume that your funds are “locked in” by default, but are forced to attract deposits at more competitive rates.

In this framework, stablecoins do not “make small cakes”; rather, they will promote “more credit allocation and broader financial intermediation activities, ultimately enhancing consumer welfare.” As Professor Cong stated: “Stablecoins are not intended 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 motivator for existing institutions to improve their services.

regulatory “unlocking”

Of course, regulators have ample reasons to be concerned about the so-called “run risk” — that is, once market confidence wavers, the reserve assets backing the stablecoin may be forced to be sold off, potentially triggering a systemic crisis.

However, as the paper points out, this is not some unprecedented new risk, but rather a standard risk pattern that has long existed in financial intermediary activities, which is fundamentally highly similar to the risks faced by other financial institutions. We already have a complete set of mature response frameworks for liquidity management and operational risk. The real challenge lies not in “inventing new physical laws,” but in correctly applying existing financial engineering to a new technological form.

This is precisely 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 collateralized deposits, the act imposes strict regulations for safety at an institutional level. As stated in the paper, these regulatory safeguards “seem to cover the core vulnerabilities identified in academic research, including run risks and liquidity risks.”

The legislation sets minimum statutory standards for the industry—sufficient reserves and enforceable redemption rights—but the specific operational details are to be implemented by banking regulatory agencies. Next, the Federal Reserve and the Office of the Comptroller of the Currency (OCC) will be responsible for translating 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 the integration of large-scale reserve management and blockchain systems.

On July 18, 2025 (Friday), U.S. President Donald Trump showcased the recently signed “GENIUS Act” during a signing ceremony held in the East Room of the White House in Washington.

Efficiency Bonus

Once we move beyond the defensive mindset of “deposit diversion,” the real upside potential will emerge: the “underlying pipeline” of the financial system itself has reached a stage where it must be restructured.

The true value of tokenization is not just 24/7 availability, but “atomic settlement”—achieving instant cross-border value transfer without counterparty risk, which is a problem that the current financial system has long been unable to solve.

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

This has far-reaching implications for global fund management: funds no longer need to be stuck “in transit” for several days, but can be allocated across borders instantly, releasing liquidity that is currently tied up in the agent banking system. In the domestic market, the same efficiency improvements also herald lower costs and faster payment methods for merchants. For the banking industry, this is a rare opportunity to update the traditional clearing infrastructure that has long relied on tape and COBOL to barely maintain itself.

Upgrade of the US Dollar

Ultimately, the United States faces a binary choice: either lead the development of this technology or watch the future of finance take shape in offshore jurisdictions. The US dollar remains the world's most popular financial product, but the “rails” that support its operation have clearly aged.

The “GENIUS Act” provides a truly competitive institutional framework. It “localizes” the field: by incorporating stablecoins into the regulatory boundary, the United States transforms the uncertainties that originally belonged to the shadow banking system into a transparent and robust “global dollar upgrade plan,” shaping an offshore novelty into a core component of domestic financial infrastructure.

Banks should no longer get caught up in the competition itself but should start thinking about how to transform this technology into their own advantage. Just like the music industry was forced to transition from the CD era to the streaming media era—initially resisting, but ultimately discovering it was a gold mine—banks are resisting a transformation that will eventually save them. When they realize that they can charge for “speed” instead of relying on profits from “delay,” they will truly learn to embrace this change.

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