What Are Stablecoins and Will They Put Banks Out of Business – 1-Year Later

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What Are Stablecoins and Will They Put Banks Out of Business – 1-Year Later

About a year ago, the Genius act passed. As a result, I did a special episode with the title, “What Are Stablecoins and Will They Put Banks Out of Business.” Well, we are still here, but we have some pending legislation on this topic that is still under consideration. Last year the house passed the Clarity Act with a vote of 297-134. It has been stuck in the Senate for over a year now, but it just recently cleared the Senate Banking Committee in May of this year. I’m not going to get into the details of the Clarity Act today. Some tout the Clarity Act as absolutely necessary to provide the regulatory guidance needed for crypto innovation to really be set loose. Others see it as the greatest single threat to the existence of the banking system because it allows interest-like payments for stablecoin custodians. So, I’m going to refresh this episode to cover the to cover the topic again. You’ve probably heard of stablecoins before, but you might not know what it is or how it will affect you.

Stablecoins are a form of crypto currency. That means they live on a block chain. This is an electronic record of transactions that has no end. It is literally a never-ending digital chain. With each transaction that is performed, another link is added to the end. 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. But 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 Central Bank Digital Currency. Legislation was also passed last year to prevent the Fed from issuing a currency that was in digital form. To be clear, stablecoin is not a digital dollar. Instead, it is a cryptocurrency that is backed by a 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 stablecoin affect you? Probably not much, unless you have actively use crypto wallet or crypto account. To deal in crypto currency requires you to be well versed with all things technology and the learning curve for the different types of crypto assets is steep. Some people take the time to learn about what they are buying. Others just blindly buy it and hope it works out.

Here are some things you can do with stablecoin:

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 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 more and more diverse, so stablecoins will likely come alongside Venmo and Pay Pal as ways people move money in real time to other people.

Will stable coins replace banks? I don’t think so. At least not in the near future. Something that has come about since I addressed this topic a year ago is the idea of tokenized deposits. This is a way for banks to allow for payments on a blockchain that are backed by real dollars on their balance sheet. It addresses this most valuable trait of stablecoin, which is faster payments. This is the banking industry’s answer – and I think it’s a pretty good one for people that value knowing who is holding their money. Banks have historically been one of the safest places to keep your money. That is still the case. It is possible (although unlikely) that a stablecoin custodian could fail and that there could be some measure of risk to your capital. Community banks, in particular, add a layer of relationship that can make people feel even more secure with their money. I still see stablecoin and cryptocurrency at large coming alongside and augmenting banks – but not making them extinct. I also think this is healthy competition that will encourage banks to modernize how they settle transactions. One of the big arguments over the Clarity Act is whether stablecoins ought to be able to pay rewards. These rewards are not interest per se, but they are some kind of enticement to have your money on deposit with a stablecoin. So, we’ll keep an eye on the discussion in the Senate which is scheduled to take place in September. Things are always changing.

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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 August 10, 2026. 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.