Citi Warns Stablecoin Yields May Trigger $6.6 Trillion Bank Outflows

- Stablecoin interest offerings pose risks of massive deposit migration from traditional banks, Citi's Ronit Ghose warns. - Regulatory clash intensifies as banks and crypto advocates debate stablecoin yield policies. On August 25, 2025, Ronit Ghose, head of Citi's Future of Finance, issued a stark warning that traditional banks could see large-scale consumer deposit outflows if stablecoin issuers begin offering interest. According to a CoinDesk report from the same day, the warning drew comparisons to the money market fund boom of the 1980s, which put immense strain on banks. A similar shift today could drive up funding costs and credit prices, ultimately crimping banks' ability to lend to households and businesses. Financial experts and banking advocates echoed Ghose’s warning, pointing to the risks of a significant migration of funds toward higher-yielding stablecoins. They argue this trend could push banks to rely more on wholesale funding markets or raise their deposit rates to compete. As a result, credit would become costlier across the economy. In response, the U.S. banking sector has ramped up its lobbying efforts to address what it describes as regulatory gaps that might permit stablecoin issuers to pay yields. The Bank Policy Institute is leading the charge, cautioning that enabling such practices might destabilize the financial system and could, by some estimates, drive up to $6.6 trillion in deposit outflows. On the other hand, the cryptocurrency industry has challenged these assertions, arguing that restrictive measures would hinder innovation and curb consumer choice. Crypto advocates maintain that stablecoins with interest offerings could present a competitive alternative for savers without threatening overall financial stability. This contentious regulatory debate unfolds against the backdrop of increased governmental support for stablecoins. In March, Treasury Secretary Scott Bessent reaffirmed the U.S. government's endorsement of dollar-pegged stablecoins, viewing them as instrumental in preserving the dollar’s global reserve currency status. Therefore, policymakers are grappling with the challenge of balancing the need for innovation with the imperative of maintaining financial stability. As of 17:09 UTC on August 25, several stablecoins remained strong performers in the market. Tether USDt (USDT) was trading steadily at $1 with a 0.046% change in 24-hour volume, and USDCoin (USDC) also held at $1, reflecting a 0.062% increase in trading volume over the same period. Meanwhile, PayPal USD (PYUSD) maintained a $1 value with a 0.024% volume change, while First Digital USD (FDUSD) was priced at $0.997, showing a slight 0.009% adjustment in trading volume.