Why Wall Street Supports Stablecoin Interest — and Why Banks Fear It

3-Point Summary

• The Clarity Act’s core conflict stems from a structural power shift between Wall Street and the banking sector.
• Interest-bearing stablecoins strengthen institutional asset managers by expanding Treasury demand and accelerating on-chain finance.
• Banks oppose the bill because stablecoin yield threatens deposits, low-cost funding, and long-standing regulatory privileges.

Stablecoin interest is reshaping the balance of power in global finance—strengthening Wall Street, weakening banks, and accelerating the shift toward an on‑chain digital‑dollar economy.

20‑Second Shorts Video (Updated July 28, 2026)

Why Wall Street Wants Stablecoin Interest — and Banks Fear It #StablecoinInterest #WallStreetVsBanks #OnchainFinance

Clarity Act: Why Wall Street Supports It While Banks Oppose It
The Structural Clash Over Allowing Interest on Stablecoins

The U.S. Clarity Act is a bill designed to clarify the regulatory framework for stablecoins, with its core question being whether stablecoins are allowed to pay interest.
This is not a mere technical regulation issue; it is a matter of restructuring the balance of power in the financial sector, which is why the interests of different players diverge so sharply. In particular, it is highly symbolic that mega‑institutions like BlackRock, Fidelity, and Goldman Sachs support it, while banks oppose it.

Global asset managers such as BlackRock and Franklin Templeton already manage Treasuries and MMFs directly on‑chain, as discussed in the previous article Tokenized Treasuries, MMFs, and Deposit Tokens: The Three Core Pillars of Institutional On‑Chain Finance.
For these institutions, allowing stablecoins to pay interest effectively means an increase in Treasury‑based revenue. Because stablecoin yields are structurally linked to Treasury yields, rising demand for Treasuries translates into larger assets under management and higher fee income for asset managers.

Investors (wallet holders) can directly purchase Treasury and MMF tokens issued by these institutions, hold fund shares on‑chain, and automatically exercise redemption and yield rights via smart contracts.
Upon redemption, the tokens are burned and proceeds are paid out in stablecoins. This mechanism was covered in detail in the previous article How $7 Billion Moved On‑Chain: Inside Tokenized MMFs and Their Smart‑Contract Infrastructure.

In short, allowing stablecoins to pay interest fits perfectly with the existing business models of large asset managers. As the on‑chain ecosystem for Treasuries, MMFs, and deposit tokens expands, these institutions manage more assets, and stablecoin interest becomes a catalyst for that growth.
By contrast, banks see their deposit‑based business model eroding, which naturally leads them to oppose such changes.

Moreover, permitting interest on stablecoins accelerates smartphone‑based personal banking and triggers a structural shift in how individuals access global finance.
This is closely aligned with the trend described in the previous article Samsung Wallet Announces the World’s First Integrated Financial OS for AI, On‑Chain, and Stablecoins, where smartphones function as personal hubs for on‑chain financial activity.

1) Why Do Wall Street Institutions Support Interest‑Bearing Stablecoins?

Wall Street institutions do not view the approval of interest‑bearing stablecoins as a simple regulatory relaxation. They see it as a new growth opportunity that aligns precisely with their existing business models.
Three key pillars—expansion of the Treasury market, growth of on‑chain finance, and higher client yields— connect seamlessly with their strategic priorities.

Rising Treasury Demand: Direct Revenue Expansion for Institutions

For stablecoins to pay interest, they must hold more U.S. Treasuries as reserves.
Treasuries are core products for institutions like BlackRock and Fidelity, which operate some of the world’s largest bond and money‑market funds.
Consequently, interest‑bearing stablecoins naturally increase demand for Treasuries, expanding institutional assets under management and fee‑based revenue.

• Stablecoin interest = Treasury‑based yield
• Higher Treasury demand → Higher institutional revenue

On‑Chain Finance Expansion: Alignment with Long‑Term Institutional Strategy

Institutions already view on‑chain finance as the next‑generation financial infrastructure.
BlackRock CEO Larry Fink has repeatedly emphasized that “all financial assets will eventually be tokenized,” and in practice, institutions are investing heavily in tokenized Treasuries, on‑chain MMFs, and blockchain‑based payment and settlement systems.
Allowing stablecoins to pay interest is a key missing piece that completes this on‑chain ecosystem and aligns perfectly with their long‑term strategic roadmap.

Higher Client Yields: Capital Flows Toward Institutions

Bank deposit rates are low, whereas stablecoin yields—backed by Treasuries—can offer higher returns.
From the perspective of institutional clients, this means they can earn more than they would with traditional bank deposits, while institutions attract larger pools of capital.
In effect, interest‑bearing stablecoins raise client yields and strengthen capital inflows into institutional products.

• Higher yields than bank deposits
• Client yield improvement → Increased capital inflows to institutions

2) Why Do Banks Oppose Interest‑Bearing Stablecoins?

Banks, on the other hand, see interest‑bearing stablecoins as a structural threat.
The core banking business model is built on gathering deposits and extending loans, earning a spread between deposit rates and lending rates.
If stablecoins begin paying interest, this model is fundamentally undermined.

Deposit Flight: Collapse of the Core Banking Business Model

Banks raise funds by paying very low interest on customer deposits, then convert those deposits into loans at higher rates to capture the spread.
However, if stablecoins can pay Treasury‑based interest, customers are likely to choose USDC‑like stablecoins over traditional bank deposits.
This weakens banks’ deposit base, reduces their lending capacity, and significantly erodes profitability.

Loss of Low‑Cost Funding Advantage

Banks’ greatest advantage has historically been low‑cost deposit funding.
If stablecoins offer higher yields, customers will migrate from bank deposits to stablecoins.
This raises banks’ funding costs, weakens their lending and investment profit models, and severely damages their traditional competitive edge.

• Bank deposit rates < Stablecoin yields
• Customer migration → Higher funding costs for banks

Erosion of Regulatory Privileges: A Shift in Financial Power Structures

Banks have long enjoyed regulatory privileges such as deposit insurance (FDIC), exclusive access to core payment infrastructure, and direct connections to central banks.
If stablecoins are allowed to pay interest, non‑bank financial institutions gain similar interest‑bearing capabilities, weakening banks’ monopoly position.
This represents a reconfiguration of power within the financial sector—something banks are deeply reluctant to accept.

Smartphone‑Based Personal Banking: Structural Change in Global Financial Access

A Samsung Wallet user can earn yield comparable to dollar deposits simply by holding USDC, without relying on a traditional bank.
In effect, every smartphone user worldwide can have a built‑in Web3 wallet that functions like a personal bank.
As a result, individuals have less need to use banks for basic savings and yield‑earning functions.

Final Conclusion

The Clarity Act is not just a piece of crypto regulation; it is a bill that reshapes the power structure of traditional finance.
Wall Street institutions gain structural advantages from interest‑bearing stablecoins: the Treasury market expands, on‑chain finance enters a full‑scale growth phase, and client yields rise.
Banks, meanwhile, face weakening deposit bases, loss of low‑cost funding, and the erosion of long‑standing regulatory privileges.
In essence, this bill accelerates the shift toward an institution‑centric on‑chain financial system and destabilizes the bank‑centric legacy architecture.
If stablecoin interest is ultimately approved, we may enter an era of digital dollars paying yield directly within smartphone operating systems— a turning point that could fundamentally alter the center of gravity in global finance.

Younchan Jung
Researcher exploring structural shifts in AI, blockchain, and the on‑chain economy.

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