Why a U.S. Ban on Yield-Bearing Stablecoins Would Help 'Too Big to Fail' Banks - Ep. 840
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The single biggest set of beneficiaries of interest bearing stablecoins being banned are going to be the largest financial companies in America. If you think the too big to fail problem is bad now, wait until you do this.
Hi, everyone. Welcome to Unchained, your no hype resource for all things crypto. I'm your host, Laura Shin. Every episode, we love to feature your comments. Today, we have responses to my recent interview with Linda Shea, developer ecosystem lead at Farcaster. Linda and I discussed micro payments for content and whether this will finally take off on Farcaster. On x, Redrum Rick said, LFG, let's see if Far can make it happen. If you want your response featured, leave it on a video on YouTube, Farcaster, or x. This is the 05/23/2025 episode of Unchained. Bitkey is the Bitcoin wallet from the tea
Zero Knowledge Consulting. Welcome, Austin. Thank you very
much. Happy to be back. Potentially on the verge of passing a stablecoin bill in the senate. This was thought to be one of the few pieces of bipartisan legislation that congress might take up this session, but it's proved to be a more contentious process than expected. An initial attempt to get past a procedural step known as the cloture vote to allow for for floor debate initially failed, and it finally passed on Monday of this week. You've been especially critical of one of the provisions, which would ban yield bearing or interest bearing stablecoins. How did this ban come to be?
So the origin of the ban is, if we're being honest, essentially lobbying by various banking associations to prevent stablecoins from paying yield. There is, despite the facts on the ground, a belief in the banking sector in The United States that somehow the passage of stablecoin legislation is going to be immediately destructive to deposits within The US system. Now as a factual matter, most of the demand for stablecoins currently comes from non US persons who are getting access to dollars. And in The US, it's really only people using it for crypto trading and some other niche use cases. They
as far as I understand, I think this was something that Democrats supported. Is that correct?
Yeah. So the Republicans, I think, largely could do without this, though there is, let's be clear, not complete uniformity views among the Republicans. Like Josh Hawley, for instance, is on the record having raised this concern to name at least one Republican. But it is mostly Democrats who have been concerned about this. And I think it is mostly Democrats who, I will be gentle and say, may not be fully informed on the dynamics of market structure in the modern banking system who are for this. Because as I recall, Ritchie Torres at one point was on Unchained and talking about this exact proble
And is the support of the ban also leaning more toward the older Democrats? Okay. Correct. And so what reasons do they give for supporting this ban? So
the sort of first line reason that people give is, quote, unquote, we have to protect community banks, to which I say, that's nonsense. And what I mean by that is this. There are many small community banks that are very effective, very capable, and can compete. And in fact, probably allowing more competition for deposits is a net positive as over again the post, like, Dodd Frank period, it's been a systemic move towards the very large banks where deposits have been going. This has not been to the benefit of smaller bags in general. But two, there are a significant subset of community bags wher
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