According to Colin Butler, executive vice president of capital markets at Mega Matrix, the regulatory uncertainty surrounding stablecoins could put traditional banks at a greater disadvantage than crypto companies.
Butler said financial institutions have already invested in digital asset infrastructure but are unable to fully leverage it while lawmakers debate how stablecoins should be classified. “Their general advice to their boards is that you can’t justify the cost of capital to know if stablecoins are treated as deposits, securities or a separate means of payment,” he told Cointelegraph.
Several major banks have already developed parts of the infrastructure needed to support stablecoins. JPMorgan developed its Onyx blockchain payment network, BNY Mellon launched a digital asset storage service, and Citigroup tested tokenized deposits.
“Infrastructure costs are real, but regulatory uncertainty limits the extent to which this investment can be scaled up, as risk and compliance functions do not clarify full deployment without knowing how products are classified,” Butler said.
On the other hand, crypto companies that have operated in regulatory gray areas for years are likely to continue to do so. “Banks, on the other hand, cannot operate comfortably in this gray area,” he said.
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Productivity gaps can trigger savings migration
Another concern is the growing difference in returns on stablecoin platforms and those offered by traditional bank accounts. According to Butler, exchanges often offer 4% to 5% on stablecoin balances, while the average US savings account yields less than 0.5%.
He said history shows depositors move quickly when high yields are available, pointing to the shift to money market funds in the 1970s. Today, this process can be even faster, as transferring funds from bank accounts to stablecoins takes only minutes, and the difference in income is larger.
Meanwhile, Fabian Dorey, Sygnum’s chief investment officer, said the competitive gap between banks and crypto platforms is important, but not yet critical. He said a large-scale deposit flight is unlikely in the near future as institutions still prioritize trust, regulation and operational stability.
“But asymmetry can accelerate migration at the margin, particularly among corporations, fintech users and globally active customers, already facilitating the transfer of liquidity across platforms,” Dorey said. “When stablecoins are treated as effective digital cash instead of crypto trading instruments, the competitive pressure on bank deposits becomes much more visible,” he said.
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Restrictions on yield may push activity offshore
Butler also warned that attempts to limit stablecoin production could inadvertently push activity into less regulated areas. Under current US law, stablecoin issuers are prohibited from paying direct income to their holders. However, exchanges can still be redeemed through lending programs, staking, or promotional rewards.
If lawmakers impose broader restrictions, capital could shift to alternative structures, such as synthetic dollar tokens. Products like USDe Athena generate yield through derivatives markets rather than traditional stocks. These mechanisms can be returned even if stablecoins cannot be regulated.
According to Butler, if this trend accelerates, regulators may end up with the opposite of what they intended, as more capital flows into opaque offshore structures with fewer consumer protections, according to Butler. “Capital does not stop looking for income,” he said.
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