Moody's Analysis: Stablecoin Outlook Is Promising, But Not a Short-Term Threat to Banking

Recently, Abhi Srivastava, Vice President of the Digital Economy Group at Moody's Investors Service, stated that at this stage, the impact of stablecoins on the banking industry is "limited," and they are unlikely to pose a substantial threat to traditional deposits in the short term.

Srivastava pointed out that although the role of stablecoins in payments, cross-border trade, and on-chain finance is "expanding," their usage remains limited.

While the total market capitalization of stablecoins has already exceeded $300 billion since the end of last year, the existing U.S. payment system is "fast, low-cost, and reliable," indicating that stablecoins are unlikely to disrupt the current payment landscape on their own in the near term.

More importantly, current U.S. regulations prohibit stablecoins from earning payment yields, meaning they are unlikely to replace traditional deposits on a large scale domestically.

However, in the long run, as the market value of stablecoins and tokenized real-world assets (RWA) grows, the banking industry may face increasing competitive pressure, leading to deposit outflows and reduced lending capacity.

Currently, regulatory policies on stablecoins have become a focal point of controversy between the crypto industry and the banking sector. Banks worry that stablecoin payment yields could erode their market share, and this disagreement has also hindered the progress of the CLARITY Act (H.R.3633) in Congress.

The bill is currently at an impasse, after crypto companies like Coinbase publicly opposed early drafts, mainly due to concerns over the lack of legal protections for open-source software developers and the ban on stablecoin payment yields.

Additionally, although North Carolina Senator Thom Tillis indicated earlier this month that a new draft acceptable to both sides might be released, market sources report that the draft has faced opposition and no release date has been announced.

Furthermore, industry executives and analysts warn that if the CLARITY Act ultimately fails to pass, the crypto industry could face hostility from lawmakers and strict scrutiny and enforcement actions from regulators.

In summary, Moody's analysis offers a short-term optimistic outlook for the banking industry. However, investors must closely monitor whether the CLARITY Act can break the deadlock and whether the ban on stablecoin payment yields will be overturned. Once the ban is lifted, the stablecoin market could disrupt traditional banking operations and overturn the existing financial market structure.

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