The CEO of stablecoin issuer Circle has make headlines with his strong stance on the importance of stablecoin rewards and the banking industry’s unfounded fears surrounding interest payments on these assets. During a recent discussion at the World Economic Forum (WEF) in Davos, Jeremy Allaire dismissed concerns that interest-bearing stablecoins could threaten the stability of the banking sector, labeling such anxieties as “totally absurd.”
The banking industry has voiced significant apprehensions regarding stablecoin rewards, claiming that interest payments could disrupt market dynamics and hinder credit creation. In the United States, banks have heavily criticized the GENIUS Act, suggesting it contains loopholes that could jeopardize the financial system.
Allaire rejected these arguments, drawing upon historical precedents where similar concerns were raised regarding the introduction of new financial products—such as government money market funds. Notably, Bank of America’s CEO, Brian Moynihan, has drawn parallels between stablecoins and traditional money market mutual funds, which necessitate reserves held in short-term instruments like U.S. Treasuries, therefore limiting lending capacity within the system.
As a cautionary note, Allaire indicated that if U.S. Congress fails to restrict interest-bearing stablecoins, the banking sector may face significant challenges. He estimated that as much as $6 trillion in deposits—approximately 30% to 35% of all U.S. commercial bank deposits—could migrate from traditional banks to the stablecoin ecosystem.
Despite these dire predictions, Allaire urged a re-examination of the narrative claiming financial products distract from lending capabilities. He emphasized that the growth of these products has not inhibited lending, countering the argument that deposit losses from banks would lead to a collapse in credit availability.
The Importance of Rewards
In his address, Allaire articulated that stablecoins should not be singled out for their rewards system, a feature that exists across numerous financial products. “Those rewards exist in every balance that you have with a credit card that you use. They exist around many other financial services that we have,” he stated, advocating for stablecoins’ role in enhancing customer engagement and traction.
Allaire further argued that rewards are crucial for the stability and appeal of stablecoins, adding, “These rewards are actually very important; they help with stickiness and customer traction. They’re not significant barriers to monetary policy.” He highlighted a growing trend of lending shifting away from traditional banks, with a notable influx of capital moving towards private credit.
During a panel discussion at the WEF, evidence was presented showing how significant GDP growth in the U.S. emerged from private credit activities centered around junk bonds rather than traditional bank credit. “So private credit issuing junk bonds has helped capitalize on American technological advancements,” he asserted.
Reiterating these points, the Coinbase Institute previously highlighted that “credit is evolving, not shrinking. Lending is transitioning to private credit, fintech, and DeFi channels that do not rely on deposits. Liquidity moves—it doesn’t vanish.” In closing, Allaire sought to redefine how we perceive stablecoins arguing for their recognition as safe monetary instruments, thus promoting the need for prudential supervision while developing lending models atop these digital assets.
