When Progress Hurts Communities
By Colin Barrett
President/CEO, Tennessee Bankers Association
Stablecoins have evolved quickly from an obscure corner of the crypto ecosystem into the mainstream policy debate. What began as a tool for settling crypto transactions is now being marketed as a “better” form of money—digital, fast, and possibly interest-bearing.
That evolution matters. A stablecoin that pays interest is no longer just a payments innovation; rather, it is a functional substitute for a bank deposit but without the protections or regulations that accompany bank deposits.
Banks are in the business of growing our communities. Deposits fund loans. Loans fund homes, small businesses, farms, and local development. Remove deposits from the system, and the ability of banks to lend is constrained. It is that simple. When deposits leave banks for interest-bearing stablecoins, the result is not a more efficient financial system—it is a smaller one, with fewer resources available to local communities.
Stablecoin issuers claim they are merely offering consumers more choice. But this framing ignores the imbalance they are creating. Stablecoin issuers benefit from the credibility of the U.S. dollar and the banking system while bypassing the responsibilities that make that system safe and resilient.
The unchecked expansion of stablecoins risks taking us backward—toward a world where multiple private “dollars” circulate simultaneously, governed by different rules, and trusted to different degrees. Uniform currency is not a coincidence of modern banking; it is a foundation of economic stability.
None of this is to suggest that innovation should be stopped or that blockchain-based payment technologies have no role in the future financial system. On the contrary, banks themselves are actively exploring faster payments and tokenized deposits. The problem is not the technology—it is the regulatory arbitrage.
That brings us to the legislative moment now before Congress.
Lawmakers are grappling with how to regulate stablecoins, beginning with proposals like the GENIUS Act and extending into broader digital asset market structure legislation. Congress will ultimately determine who is allowed to issue dollar-linked instruments, what those instruments can do, and how closely they resemble insured deposits.
For bankers, these decisions are critical. Market structure matters. Who holds reserves? Where are those reserves invested? What happens in a period of stress? Are consumers protected, or are they simply assuming risks they do not fully understand? These are not academic questions—they go directly to financial stability and public confidence.
And if stablecoin issuers are permitted to pay interest, the competitive landscape changes permanently – and unfairly. Deposits could migrate out of banks not because banks are inefficient, but because Congress created a parallel system with fewer rules and lower costs.
Engagement by bankers is essential because policymakers need real-world context. They need to hear how deposits fund local lending, how liquidity supports communities during downturns, and why a strong banking system cannot coexist with an unregulated deposit substitute operating at scale.
Stablecoins will almost certainly be part of the financial future. The question is whether they complement the banking system or hollow it out. The answer will depend on the rules being written right now—and on whether bankers make their voices heard before those rules are finalized.