Stablecoin And Banks: A "Catfish" in the Financial Pond?

For many years, whenever stablecoins are mentioned, the banking industry immediately expresses concern. They fear one thing: if people can hold a digital currency backed by real assets directly on their phones, why would they need to deposit money into interest-free accounts with high fees, and that even get “frozen” on weekends?

But a new study from Professor Will Cong of Cornell University reveals a different truth: stablecoins are not the enemy trying to “kill” banks. Instead, they are like a “catfish” in the financial pond—something that forces the traditional system to wake up and improve itself.

Why Do People Still Keep Money in Banks?

This question may sound strange, but it is the key to understanding the entire debate. In 2019, when Christian Catalini’s company announced the Libra project, the financial world was shaken. Central banks, regulators, even politicians issued warnings that: if people start using stablecoins, deposit flows will drain out of the banking system like water from a leaky bucket.

However, this phenomenon has never truly materialized.

Although stablecoin market capitalization has grown rapidly, empirical studies have found little clear correlation between their growth and deposit withdrawals. Why is that?

The answer lies in a concept called “deposit stickiness.” Your checking account is not just a place to hold money. It is a central “hub” connecting your entire financial life: your salary is directly deposited there, your linked credit card is connected to it, mortgage loans are managed there. All these elements form an “all-in-one service package” that is too convenient to leave—just for a few extra percentage points of interest.

In other words: banks have built an “ecosystem,” not because their services are excellent, but because leaving it is too complicated. That is the “catfish effect”—the presence of something different forces the entire system to wake up.

Stablecoins Do Not Destroy, But Drive Competition

Data clearly shows: stablecoins are not “missiles” designed to destroy banks. But their presence has created an invisible “discipline pressure.”

Once banks realize there is a reliable alternative out there—where users can have direct control over their money without intermediaries—they can no longer rely on “habitual user behavior.” They must adapt:

• Offer higher interest rates on deposits: Instead of letting money sit idle with near-zero interest, banks are forced to raise rates to compete with the outside option.

• Improve operational efficiency: Outdated, slow, and obsolete payment systems are beginning to modernize.

• Create new products and services: Instead of just making money from “trapping” customer funds, banks start thinking about creating real value.

This is not a “smaller slice of the pie”—on the contrary, stablecoins make the “pie bigger.” When banks are pushed to improve their services, consumers benefit from higher interest rates, lower fees, and better technology.

From “Dark Horse” to “Efficiency”: The Payment Revolution

Now, if we eliminate fears about “deposit outflows” ( and consider that evidence shows they are not a real threat ), a truly growing space will emerge.

The current global financial system is built on outdated infrastructure. Cross-border payments still take days, cost a lot, and involve numerous intermediaries. If you are in Vietnam and want to send money to someone in the US, your funds will be “stuck” in the correspondent banking system for days, losing the opportunity to use that money during that time.

Stablecoins compress this process into a blockchain transaction—immediately, irreversible, transparent. This is not just a small improvement. It is a fundamental change:

• Liberate global liquidity: Money is no longer “stuck” for days in outdated systems. It can move freely across borders, increasing the efficiency of the entire global economy.

• Reduce intermediary costs: The “fees” that banks used to earn from “friction” will decrease. Instead, they can profit from providing “speed” rather than “delay.”

• Upgrade infrastructure: Many banks still run on legacy systems written in COBOL and maintained with “digital duct tape.” This is an opportunity for modernization.

The GENIUS Act and the Real Regulatory Framework

Of course, regulators have valid concerns. If the stablecoin market becomes volatile, and all users want to withdraw their funds simultaneously, reserve assets could be forced into a “fire sale,” causing systemic crises.

But this is not a new risk. It is the same risk faced long ago by other financial institutions—like shadow banking.

The solution is not to “invent new physical laws of economics,” but to apply existing regulatory rules to new technology.

This is where the GENIUS Act comes into play. Signed into law by the U.S. President in July 2025, it clearly stipulates:

• Full reserves: Every issued stablecoin must be backed 100% by cash, US Treasury short-term bonds, or insured deposits.

• Enforceable redemption rights: Users can request to redeem their funds at any time.

• Risk management: Federal agencies like the Federal Reserve and the Office of the Comptroller of the Currency will oversee stablecoin issuers to ensure they properly account for operational risks, custody failure potential, and the complexity of managing large-scale reserves.

These rules “seem to cover” the core weaknesses identified by researchers, including risks of mass withdrawals and liquidity issues.

The US Dollar Upgrades or Leaves It to Others?

Ultimately, the United States faces an unavoidable choice: either lead this change or watch the future of finance take shape in offshore jurisdictions—where stablecoin issuers are outside U.S. oversight.

The US dollar remains the most preferred currency worldwide. But the “rails” it runs on are clearly outdated. The GENIUS Act, by “domesticating” the stablecoin space, has transformed what was once “offshore shadow” into a “transparent, solid” part of the domestic financial infrastructure.

Banks should no longer fear competition. Instead, they should start thinking about how to leverage this technology for their benefit.

This scenario is similar to what the music industry experienced. Initially, when Napster and streaming appeared, the recording industry panicked. They sued hundreds, issued thousands of subpoenas. But eventually, they realized that streaming was not a piracy goldmine—it was a new consumer goldmine.

Banks resisting this transition are ultimately the ones who will be saved by it. When they realize they can profit from “speed” rather than “delay,” and understand that stablecoins do not destroy banks but drive them forward, they will truly learn to embrace this change.

That is the “catfish” in the financial pond—a warning sign, a stimulus, an opportunity for the traditional system to wake up and evolve on its own.