Multicoin Exec Says GENIUS Act Will End Banks’ ‘Rip-Off’ of Retail Depositors with Low Rates

Multicoin Capital managing partner Tushar Jain has predicted that the GENIUS Act will trigger a competitive upheaval in retail banking, with major technology companies poised to challenge traditional banks by offering stablecoin products with superior yields and user experiences.

Jain argued that banks have long exploited retail depositors by paying minimal interest rates.

He foresaw that tech giants like Meta, Google, and Apple would soon leverage their massive distribution networks to offer stablecoins with better returns, instant settlement, 24/7 payments, and free transfers embedded directly into widely used apps and operating systems.

Banking Industry Fights Yield-Sharing as Deposit Flight Fears Mount

The banking sector has mounted an aggressive lobbying campaign to prevent stablecoin platforms from offering competitive yields to holders, despite the GENIUS Act’s prohibition applying only to issuers, not intermediaries.

Five major U.S. banking trade organizations have urged Congress to close perceived “loopholes” that allow crypto exchanges to offer stablecoin yields through affiliate programs and marketing arrangements, citing Treasury estimates of potential $6.6 trillion deposit outflows.

Citigroup analyst Ronit Ghose particularly warned that stablecoin interest payments could trigger 1980s-style deposit flight similar to when money market funds surged from $4 billion to $235 billion in seven years, draining traditional bank deposits.

During that period, withdrawals exceeded new deposits by $32 billion between 1981 and 1982 as consumers chased higher returns.

The American Bankers Association and the Bank Policy Institute argued that joint marketing arrangements between issuers and exchanges could accelerate deposit flight during periods of financial stress.

However, the banking lobby’s position faces contradictions as major institutions simultaneously explore stablecoin opportunities.

Citigroup CEO Jane Fraser confirmed the bank is “looking at the issuance of a Citi stablecoin” while developing tokenized deposit services for corporate clients.

JPMorgan also launched JPMD deposit tokens for institutional blockchain payments and served as lead underwriter for Circle’s IPO.

Jain dismissed banking concerns, noting that the prohibition on passing interest to stablecoin holders is “easily circumvented,” as evidenced by Coinbase’s yield-sharing with customers.

Stripe CEO Patrick Collison reinforced this view, arguing that depositors “are going to, and should, earn something closer to a market return on their capital.”

Given that average U.S. savings deposits yield just 0.40%, while $4 trillion in bank deposits earn 0% interest, Collison’s point is well-taken.

Stablecoin Market Consolidation Faces Disruption From New Entrants

The long-standing Tether-Circle duopoly, which controls 86% of the $298 billion stablecoin market, faces mounting pressure from new issuers offering yield-sharing arrangements and customizable reserve structures.

Venture capitalist Nic Carter argued that the dominance of the two major issuers has begun declining from its 91.6% peak in March 2024, driven by intermediaries rolling their own stablecoins to capture reserve yield rather than surrendering revenue to third parties.

White-label issuance platforms, including Bridge, Anchorage, Brale, M0, and Agora, have dramatically reduced fixed costs, enabling even seed-stage startups to launch their own stablecoins.

Exchanges and fintechs now face strong incentives to internalize yield rather than allowing Tether to earn approximately $35 million annually on every $500 million in deposits while the intermediary receives nothing.

Phantom wallet launched Phantom Cash, a Bridge-issued stablecoin with embedded earn and debit card functionalities.

Similarly, Hyperliquid’s public bidding process for its stablecoin attracted proposals from Native Markets, Paxos, Frax, Agora, Sky, Curve, and Ethena.

The platform currently hosts $5.5 billion in USDC, representing 7.8% of the total USDC supply, and aims to reduce its dependence on Circle while capturing reserve yield.

Ethena’s USDe has emerged as the biggest success story of 2025, surging to a $14.7 billion supply by passing along yield from crypto-based trades.

Other yield-focused stablecoins, including Ondo’s USDY, Maker’s SUSD, Paxos’ USDG, and Agora’s AUSD, have collectively accumulated more supply than during the prior bull market cycle.

Carter noted that cross-chain swaps have become significantly more efficient and cheaper, reducing network effects that previously benefited major issuers.

According to him, many fintechs and neobanks now display user balances in generic “dollars” or “dollar tokens” rather than USDC or USDT, guaranteeing redeemability in any stablecoin while managing reserves internally.

The Global Dollar consortium, launched by Paxos, includes Robinhood, Kraken, Anchorage, Galaxy, Bullish, and Nuvei, alongside over a dozen other partners.

Similarly, a report by Cryptonews suggests that JPMorgan, Bank of America, Citigroup, and Wells Fargo held early talks about creating their own stablecoin consortium.

Carter predicted that banks will join the stablecoin market as issuers, despite concerns about deposit flight, noting that even maintaining a 50- to 100-basis-point margin could generate meaningful revenue from trillions of deposits.

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