Stablecoins create pressure on deposits and insurance

The US Senate is on the verge of passing the GENIUS Act, which will define how stablecoins should be issued and backed, allowing companies to store reserves in banks.

During the SVB crisis, Circle’s withdrawal issues of $3 billion showcased the vulnerabilities of stablecoin reserves, demonstrating the shift from insured to uninsured deposits, potentially threatening bank stability.

Larger banks like JPMorgan are better equipped to handle stablecoin risks compared to smaller banks, which may face funding pressures if consumers increasingly use stablecoins for transactions.