US financial institutions should increase deposit rates to compete with the growing popularity of stablecoins, according to Matt Hougan, Chief Investment Officer at Bitwise.
These scare articles about stablecoins destroying local lending markets are absurd.
If local banks are worried about competition from stablecoins, they should pay more interest on deposits. They’re only worried because they’ve been abusing depositors as a free source of… https://t.co/WDALrdLxGp
— Matt Hougan (@Matt_Hougan) September 9, 2025
“If local banks are worried about competition from ‘stable coins’, they need to pay more interest on deposits. This concern is only because they have been exploiting depositors as a free source of capital for decades,” he noted.
Hougan also countered arguments that lending in the US would cease if stablecoins continue to capture the traditional market.
In his view, banks will indeed reduce their share in lending, but this will be offset by lending DeFi tools.
“Markets are great at solving problems: the losing side here is the banking margin. The winning side is individual depositors. The economy will be just fine,” concluded the Bitwise executive.
Hougan expressed his thoughts in response to a “scare” article by Bloomberg. It stated that small community and regional banks face a new competitive threat from stablecoins as they rely on customer deposits to support lending.
Meanwhile, large institutions still have access to more liquid wholesale capital.
The article compares yield-offering “stable coins” to the emergence of money markets in the 1970s, which provided a more profitable alternative to traditional savings accounts, leading to a depletion of bank deposits.
According to Bankrate, as of August 2025, the average APY on savings accounts in the US is 0.6%, with the highest rate at 4.35%.
Many stablecoins offer a base rate for holding above 5%, and APY in some liquidity pools can exceed 10%.
Back in July 18, US President Donald Trump signed the federal GENIUS Act, initiating comprehensive regulation of “stable coins” in the country.