Stablecoin yields challenge traditional bank deposits, experts call for banks to raise Interest Rates.

Matthew Hougan, the chief investment officer of Bitwise, recently expressed the view that traditional banks should raise deposit Intrerest Rates to cope with the competitive pressure from stablecoins.

Stablecoins are cryptocurrencies that are pegged to fiat currencies or other assets, designed to maintain price stability. Currently, some stablecoin products offer an annualized yield of up to 5%, far exceeding the average 0.6% interest rate of savings accounts in the United States. This significant gap has raised concerns about the competitiveness of traditional bank deposits.

Hougan criticized banks for viewing depositors as a source of free capital for a long time, neglecting to offer competitive deposit interest rates. He believes that in the face of the high yield challenges posed by stablecoins, banks need to reevaluate their deposit strategies to retain customer funds.

Data shows that the annualized interest rates of mainstream stablecoins such as USDC and USDT generally range between 3% and 5%, with some decentralized finance ( DeFi ) platforms even offering higher returns. In contrast, the annual interest rate for savings accounts at large American banks still hovers below 1%.

The development of financial technology provides investors with more high-yield options, while traditional banks face increasing risks of deposit loss. Experts suggest that banks could consider launching innovative products, such as high-yield checking accounts or tiered interest rate structures, to enhance competitiveness.

However, there are also views that the sustainability of stablecoin yields is questionable, and there may be higher risks behind it. Traditional banks, while raising Intrerest Rates, also need to balance returns and risks to ensure long-term stable operations.

With the rapid development of the digital asset market, competition between traditional financial institutions and emerging financial technologies is becoming increasingly fierce. How banks respond to this challenge and balance innovation with stability will be one of the key factors in the evolution of the future financial landscape.

Disclaimer: This article is for reference only. Past performance does not guarantee future results.