Casablanca – Traditional banks could end up carrying more risk from stablecoin regulation than the crypto firms they’re trying to compete with, according to a capital markets executive who says the real constraint isn’t technology, but uncertainty.
Colin Butler, executive vice president at Mega Matrix, told Cointelegraph that banks have already poured money into digital asset infrastructure, but much of it is sitting in limbo. The reason is simple. Regulators still haven’t decided what stablecoins actually are. Whether they’re treated as deposits, securities, or something else entirely will determine how far banks can go.
Ambiguous rules
“The infrastructure spend is real, but regulatory ambiguity caps how far those investments can scale,” Butler said.
Some of the biggest names in finance have already made moves. JPMorgan built its Onyx blockchain payments network. BNY Mellon rolled out a digital asset custody service. Citigroup has tested tokenized deposits internally. But inside these institutions, risk and compliance teams are holding the line. Without clear rules, full deployment isn’t getting approved.
Crypto firms don’t have that problem. They’ve been operating in uncertain regulatory environments for years. It’s baked into how they function. Banks, on the other hand, are not built to move without clarity.
That difference is starting to matter more as yield becomes a pressure point. Crypto exchanges are offering between 4% and 5% returns on stablecoin balances. Meanwhile, the average US savings account is still below 0.5%. The gap is hard to ignore.
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Butler compared the situation to the shift into money market funds in the 1970s, but said things could move faster this time. Moving money from a bank to a stablecoin platform takes minutes, not days.
Still, not everyone sees an immediate threat. Fabian Dori, chief investment officer at Swiss digital asset bank Sygnum, said a large-scale shift of deposits away from banks is unlikely in the near term. Institutions still prioritize trust, regulatory standing, and operational resilience when deciding where to park liquidity.
There’s also a policy wrinkle. US law currently prevents stablecoin issuers from paying yield directly to holders. Exchanges get around this through lending, staking, or promotional programs. Butler warned that tightening those rules further could backfire.
If returns are squeezed too much, capital may flow into alternatives like synthetic dollar products such as Ethena’s USDe, which generate yield through derivatives. That activity often sits offshore and outside tighter regulatory oversight.
“Capital doesn’t stop seeking returns,” Butler said.
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