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Circle CEO dismisses stablecoin interest threat: "Bank run concerns are overstated"
Source: DigitalToday Original Title: Circle CEO, Refutes Threats of Paying Interest on Stablecoins… “Exaggeration of Bank Run Concerns” Original Link:
Focus of Stablecoin Interest Dispute
Circle CEO Jeremy Allaire rebutted claims at the World Economic Forum in Davos, Switzerland, that paying interest on stablecoins would trigger large-scale bank withdrawals and destabilize the credit market. CEO Allaire emphasized that government money market funds(MMF) coexist with traditional banking and have not shaken the financial sector, so these concerns are “completely unfounded.”
According to data from the Investment Company Institute(ICI), as of January 2026, U.S. MMFs hold over $7 trillion in assets, increasing by $868 billion even after the Federal Reserve’s rate cuts last year. CEO Allaire pointed out that stablecoin issuers generate revenue through reserves, income sources, cooperation with traditional finance and DeFi, and can offer these as incentives to holders.
This controversy surfaced during discussions of the CLARITY Act in the U.S. Congress. A compliance platform stated that the bill could negatively impact tokenized stocks and stablecoin interest payment methods, and expressed opposition. Consequently, the bill’s voting was postponed. The platform’s CEO, Brian Armstrong, warned that if Congress cannot resolve the issue, they might withdraw support for the entire bill.
The banking industry claims that interest-bearing stablecoins threaten the banking system. U.S. Bank CEO Brian Moynihan warned that if Congress approves interest-bearing stablecoins, up to $6 trillion in bank deposits could flow into the stablecoin market. He advocates for stablecoins to operate like MMFs, eroding bank lending resources.
Meanwhile, the Senate Banking Committee proposed the Cryptocurrency Market Structure Act, which includes a clause prohibiting interest payments to stablecoin holders. The Donald Trump administration’s GENIUS Act, passed in 2025, bans stablecoin issuers from directly paying interest but allows rewards through third-party platforms such as exchanges. The cryptocurrency industry opposes this, stating it is a negotiated matter.