Decentralized finance could upend traditional banking systems

Yield-Bearing Stablecoins Could "Kill" Banking, Senator Gillibrand Warns

United States Senator Kirsten Gillibrand has expressed concerns that yield-bearing stablecoins could disrupt the traditional banking system and potentially "kill" it.

In a recent letter to the Commodity Futures Trading Commission (CFTC), Senator Gillibrand, a Democrat from New York, emphasized the need for regulatory oversight of these digital assets. She argued that yield-bearing stablecoins, which offer interest to holders, could attract deposits away from traditional banks and undermine the stability of the financial system.

"Yield-bearing stablecoins could essentially kill the banking system as we know it," Senator Gillibrand wrote. "These digital assets are designed to offer interest rates that are higher than those offered by traditional banks, which could attract deposits away from our banking system and undermine its stability."

Senator Gillibrand's concerns were sparked by the rapid growth of yield-bearing stablecoins, which have attracted significant attention in recent months. These digital assets are designed to maintain a stable value by pegging their value to a fiat currency, such as the US dollar, and offering interest to holders.

The Senator emphasized that while she is not opposed to the development of new financial technologies, she believes that regulatory oversight is necessary to ensure that these digital assets do not pose a risk to the stability of the financial system.

"We need to make sure that these digital assets are subject to the same regulatory standards as traditional financial institutions," Senator Gillibrand wrote. "We cannot afford to have a Wild West scenario where these digital assets are not subject to any regulatory oversight."

Senator Gillibrand's letter to the CFTC follows a recent report by the Government Accountability Office (GAO), which highlighted the risks associated with yield-bearing stablecoins. The report noted that these digital assets could pose a risk to the stability of the financial system if they are not subject to adequate regulatory oversight.

The Senator's concerns have been echoed by other experts in the financial industry, who have warned that yield-bearing stablecoins could pose a risk to the stability of the financial system. However, proponents of these digital assets argue that they offer a more efficient and cost-effective way to earn interest than traditional banking products.