The introduction of the GENIUS Act by the US Congress has led banks to pay more attention to stablecoins. While introducing new technology can be onerous, there are more opportunities for banks than widely-shared misconceptions lead you to believe. The reality is that stablecoins are already a multi-trillion-dollar market and banks that can accept them into their business stand to benefit greatly. In the following piece, we clarify outdated beliefs about stablecoins.

Moving forward, stablecoins are required to be regulated to be available in the US

The idea that stablecoins operate outside of regulation is outdated. Jurisdictions around the world—including Singapore (MAS), the EU (MiCA) and the U.S. (with trust company charters and the proposed GENIUS framework)—have set clear rules for issuance and custody. Regulated trust issuers like Paxos already meet the highest standards of reserve management, capital requirements and consumer protections. Moving forward, stablecoins are required to be regulated to grow in the U.S. That requirement will significantly reduce the risks for banks engaging with stablecoins.

Stablecoins Do Not Threaten Deposit Bases

Banks have feared that stablecoins will drain deposits and undermine their lending capacity. But really stablecoins only represent a parallel form of infrastructure, not a replacement for deposits. Stablecoins serve as rails for payments, settlement and capital efficiency in ways that deposit accounts cannot. Moreover, banks themselves can issue or custody stablecoins—turning what they view as a threat into a growth opportunity. Just as electronic payments once seemed threatening to banks, stablecoins will ultimately expand balance sheets if embraced strategically.

Stablecoins Are No Longer Just for Crypto Traders

While stablecoins first gained adoption as a liquidity tool for crypto exchanges, they now power a high-volume of global payments, cross-border remittances, on-chain capital markets and tokenized asset settlement. Global companies are using stablecoins to move millions of dollars in minutes instead of days. Asset managers use them as cash legs for tokenized assets and broker-dealers are leveraging them to create new revenue streams. The use cases are expanding and financial institutions that deny this reality are ignoring the signals of market transformation.

Stablecoins Do Not Undermine Financial Stability

Well-regulated stablecoins actually enhance financial stability by increasing transparency, speed and efficiency. Unlike opaque interbank transfers, on-chain stablecoin transactions are publicly auditable in real time. Reserves held in short-term Treasuries are safer than many bank assets. If anything, stablecoins demonstrate how financial markets can become more resilient through better settlement infrastructure.

The Opportunity Ahead is Vast 

Stablecoins are not a threat to banking—they are an evolution of money that can make banks more competitive. Banks that embrace them can unlock faster settlement, improved liquidity management and entirely new products for clients. Those that reject them will cede market share to fintechs, blockchain-native players and forward-thinking peers.

This post is provided for informational purposes only and does not constitute legal advice. Readers should consult their own legal counsel regarding any legal matters or requirements relevant to their specific situation. Paxos makes no representations or warranties regarding the legal accuracy, completeness, or suitability of the information contained herein.