Stablecoins Causing Bank Deposit Flight Is 'Mathematically Not Possible' Says CEO

Austin Campbell’s central argument is that stablecoins causing bank-deposit flight is “mathematically not possible”: buying a stablecoin shifts deposits to the issuer or another holder, and redeeming it shifts them back. The issuer may keep the funds as bank deposits, buy Treasury bills, or lend through reverse repo, but those transactions transfer deposits rather than make them disappear. Treasury issuance can move deposits into the Treasury General Account, Campbell says, but that happens independently of stablecoins; money-market funds and bank balance sheets are also major buyers of Treasury bills. Drawing on experience running global-rates trading desks at JPMorgan Chase and managing a stablecoin, he says banks’ claims of deposit flight are either dishonest or based on a misunderstanding of how deposits work.

Rebecca Redig likewise expects stablecoins not to affect bank deposits, consistent with a White House report she cites. Community banks, however, argued that rules should address possible deposit-flight risk before it occurs rather than waiting to respond later. Redig says the OCC’s roughly 700-page final rule reflects public comments and an economic analysis that considered the risk. The discussion therefore distinguishes the claim that stablecoin transactions do not destroy deposits from banks’ concern about how deposits might move among institutions or products.

The OCC’s final rule also drops a proposed presumption that exchange rewards funded through revenue sharing with a stablecoin issuer violate the law, leaving the question to case-by-case assessment. Renato Mariotti cautions that this change does not approve existing reward programs. Campbell says the dispute has shifted toward bank examiners and, ultimately, the courts. Starting January 18, issuing a payment stablecoin without approval becomes a federal crime punishable by up to five years. Existing issuers may receive up to a year of grace if they submit substantially complete applications by that date, but the OCC has not opened applications while awaiting White House budget-office approval of the forms.

The rule may face a court challenge, Redig says, while Mariotti sees uncertainty in how courts will treat agency rules after Loper Bright. Campbell expects lawsuits under any approach that permits, blocks, or regulates substantially similar arrangements differently. The regulatory outcome is therefore unsettled even as the rule establishes a new approval process and criminal penalties for unapproved issuance.

The discussion distinguishes stablecoins, which the host describes as one-to-one backed and regulated under GENIUS, from tokenized deposits, which are fractional-reserve bank deposits. Campbell describes JPMD as a permissioned deposit token on Ethereum for current JPMorgan Chase customers, designed to settle trades rather than circulate permissionlessly on Aave or Uniswap. SoFi, by contrast, announced interest-bearing, FDIC-insured tokenized deposits that it said would trade out in the world. Campbell questions whether such deposits could be permissionlessly traded while retaining interest or FDIC insurance, which attaches to a legal person’s accounts at a bank. If SoFi requires wallet registration and knows each customer, he says, the product may amount to a bank operating a 24/7 ledger.

Campbell argues that crypto will reach mainstream users when they no longer have to think about using it, making ease of use important for distribution. Redig expects stablecoins and other crypto-enabled payment forms to be used for payments, particularly micropayments.