What are Stablecoins

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What are Stablecoins And Will They Put Banks Out of Business

The recent passing of the Genius Act into law gives us an opportunity to talk about Stablecoins. You’ve probably heard this term before, but you might not know what it is or how it will affect you. That is the goal in today’s episode – to explain the concept of Stablecoins, how they might affect you, and to take a guess as to how they will shape the banking landscape in the future.

Stablecoins are a form of crypto currency. That means they live on a block chain, which is an electronic record of transactions that has no end. With each transaction that is performed, another link is added to the electronic chain. Think of it like an excel sheet that can be shared publicly and that has no end in its number of cells and data that can be added. It’s an electronic ledger of transactions. However, Stablecoins are different from Bitcoin. Whereas the price of Bitcoin is purely determined by supply and demand with no guarantees or governments standing behind it, Stablecoin is backed by something, well, stable, like a national currency – most often the dollar. This kind of Stablecoin is a digital asset that happens to have a dollar behind it. Now it’s important to note that it is not a Central Bank currency. It is not a digital dollar. As a matter of fact, alongside the Genius Act, the Anti-CBDC Act was passed to prohibit the Federal Reserve from issuing a central bank digital currency. So, a Stablecoin is not a digital representation of the dollar, it is a crypto-currency that is backed by the U.S. Dollar. This is an important distinction and a win for those who want to limit government control. Stablecoins are a private market creation that utilizes the dollar, while CBDC is a government creation that would actually affect the money supply. See the difference?

How will it affect you? Probably not much, unless you actively use crypto wallet or crypto account. This might be an overgeneralization, but often the younger you are, the more willing you are to consider cryptocurrency. Why is that? It’s because interaction with crypto currency requires you to be well versed with all things technology. The learning curve for crypto assets is steep. Now, some people don’t learn about what they are buying. They just buy crypto but really don’t understand what they have. That’s not the way to approach crypto. You need to understand what you are buying and what the pros and cons are to each form of crypto. When it comes to Stablecoin, I decided to run a bit of an experiment and buy some Stablecoin for this podcast episode, so I’m going to share the steps of that process.

You have to decide whether you want to hold your Stablecoin in your own digital wallet, or if you want a custodian to hold it for you. There are pros and cons to holding Stablecoin in your own wallet vs. with a custodian, and understanding the difference took me a little bit of time. I decided to let a custodian hold mine because it is easier to buy Stablecoin that way. With this method, you are essentially allowing the custodian to buy it for you. They keep up with the key that unlocks your Stablecoin. It is technically in their name, but it is set aside for you. In this instance, the custodian is acting like a bank. They hold the funds, but you own the funds. Now when it comes to a bank, you don’t worry about the bank failing because the U.S. government has said they will guarantee all of the funds up to a certain amount even if the bank fails. That same guarantee does not exist for Stablecoins, but the Genius Act does require Stablecoin issuers to hold dollar reserves to back all of their Stablecoin. It also gives legal priority to Stablecoin holders in the event of the bankruptcy of the custodian. It’s not like FDIC insurance, far from it, but it does provide a framework for Stablecoin issuers and a set of rules on how they operate to better protect the consumer. So, I decided to let a custodian hold my small amount of Stablecoin.

I downloaded the Coinbase app (not to be confused with the Base app). The Base app is a wallet that would allow me to hold the crypto myself and I’d have to keep up with the key that unlocks it. That’s safer, but more complicated. So, I downloaded the Coinbase app and set up an account. To do this, they verify your identity by asking some questions and taking a picture of your driver’s license.

I then linked it to a bank account using Plaid. Plaid essentially logs into your internet banking and makes the connection between your bank and your Coinbase account. Once I got it linked, it was easy to purchase a small amount of Stablecoin.

So back to how this will affect you. Here’s a few ways:

• If you happen to make cross border payments, Stablecoin is a much easier way to do it than an international wire. It is faster and cheaper.
• Likewise, if you happen to pay people overseas such as employees or contractors of your business, it is an easier way to get them paid.
• If you happen to own other crypto, Stablecoin will act as a medium of exchange as you move in and out of those other crypto currencies.
• I think the most common usage will be that it will act like Venmo, making payments faster and easier. The payment ecosystem is about to get even more diverse, so Stablecoins will likely come alongside Venmo and Pay Pal as ways people move money in real time to other people.

Will Stablecoins replace banks? No. At least not in the near future. It may change the role of banks when it comes to payments. There will be fewer banks in the future, and they will either be extremely large or very small. The middle will disappear. But banks serve a unique intermediary purpose. Community banks, in particular, take local funds, and redeploy those funds into projects throughout the area. In some ways, they serve as capital allocators, which is a critical function and won’t disappear overnight. I see Stablecoin and cryptocurrency at large coming alongside and augmenting banks – but not making them extinct.

Do you love doing business with your bank? If not, why don’t you give us a try? We are committed to getting better and better at building valuable, lasting financial relationships with our clients. We hope you’ll subscribe to this podcast in your favorite podcast app and share it on social media. And until our next episode, God bless you.

-President Chad P. Wilson, CFP

Today’s episode of “Money Matters” was written and recorded by President Chad P. Wilson of Foundation Bank/McKenzie Banking Company on July 29, 2025. This episode does not constitute financial advice. Please consult a financial professional to discuss your specific needs. Any rates mentioned are subject to change and are accurate as of the recording date. Foundation Bank/MBC is an Equal Housing Lender, Member FDIC.