The CEO of stablecoin issuer Circle has weighed in on the importance of stablecoin rewards and why he believes the banking industry’s concerns about interest payments on these assets are “absurd.”

Circle CEO Rejects Banks’ Stablecoin Fears

Speaking at the World Economic Forum (WEF) in Davos, Circle’s CEO, Jeremy Allaire, discussed banks’ growing concerns that paying interest on stablecoins poses a threat to the industry, calling the deposit flight narrative “totally absurd.”

The banking sector has expressed concerns about stablecoin rewards, arguing that interest payments will distort market dynamics and affect credit creation. In the US, banks have heavily criticized the GENIUS Act, claiming that it has loopholes that could pose risks to the financial system.

The executive rejected the sector’s general arguments, citing historical and practical reasons. He asserted that this exact argument has been historically used when new financial products, such as government money market funds, have emerged.

Notably, Bank of America CEO Brian Moynihan recently compared the digital assets to money market mutual funds, which require reserves to be held in short-term instruments, such as US Treasuries, reducing lending capacity in the system.

The executive told investors that the banking sector, small- and medium-sized businesses in particular, could face significant challenges if the US Congress does not prohibit interest-bearing stablecoins, as up to $6 trillion in deposits, or 30% to 35% of all US commercial bank deposits, could flow out of the banking system and into the stablecoin sector.

However, Allaire pointed out that, despite institutions claiming that financial products would “draw all the deposit base,” their growth has not “stopped the ability for lending to happen.”

The importance Of Rewards

Circle’s CEO also argued that stablecoins should not be singled out when rewards for other financial products exist and contribute to the system. “Those rewards (…) exist in every balance that you have with a credit card that you use. They exist around so many other financial products and services that we have,” he detailed.

“These rewards are actually very important,” Allaire continued. “They help with stickiness, they help with customer traction. They are not themselves like these huge monetary policy dampers.”

Most importantly, he pointed out that lending is moving away from the risk-taking of banks, with “a huge amount of lending is moving towards private credit.”

He cited a Wednesday WEF panel, in which a capital markets participant highlighted how the vast majority of GDP growth in the United States was “formed by capital market formation around junk bonds.”

“So private credit issuing junk bonds, capitalizing the build out of the American technology advancements, not bank credit,” the executive added.

Previously, Coinbase Institute shared a similar argument, affirming that “credit is evolving, not shrinking. Lending is shifting to private credit, fintech, and DeFi channels that don’t depend on deposits. Liquidity moves—it doesn’t vanish.”

Allaire concluded that “we want stablecoin money to be cash instrument money, prudentially supervised, very, very safe money. And then I think what we want to do is we want to build models for lending that build on top of stablecoins.”

As South Korea intensifies its push for crypto regulation, lawmakers have advanced a bill to establish a legal framework for issuing and trading security token offerings (STOs) using distributed ledger technology (DLT).

Lawmakers Amend Framework For Tokenized Securities

On Thursday, South Korea’s National Assembly passed key amendments to the Capital Markets Act and the Electronic Securities Act, creating a legal framework for the issuance and distribution of tokenized securities.

According to an official government release, the revised rules define tokenized securities as a broad category that extends to both debt and equity products, and recognize them as legitimate financial instruments.

The amendments to the Electronic Securities Act will allow qualified issuers to launch tokenized securities using distributed ledger technology. Meanwhile, the Capital Markets Act changes will enable the products to be traded as investment contract securities on brokerages and other licensed intermediaries.

Notably, the existing Capital Markets Act prohibited the distribution through securities firms, deeming investment contract securities “unsuitable for distribution due to their non-standard characteristics.”

The changes are “expected to enhance accessibility to investments and improve the provision of investment information for these securities,” the official government release stated.

After legislative approval, the bill will be submitted to the State Council, followed by official presidential promulgation. Therefore, the legislation is expected to be enacted one year after being signed into law, tentatively in January 2027.

Moreover, the Financial Services Commission (FSC) is set to lead the implementation, forming a joint “Token Securities Council” with relevant agencies to ensure seamless preparatory work, including the development of supporting infrastructure and enhanced safeguards.

The consultation body will comprise the FSC, the Financial Supervisory Service, the Korea Securities Depository, the Financial Investment Association, industry participants, and experts.

South Korea’s Crypto Regulatory Push Continues

This major step follows South Korea’s efforts to develop and establish clear, comprehensive rules to regulate the local crypto industry. Last week, the government shared its 2026 Economic Growth Strategy, which included a plan to open its market to Bitcoin (BTC) Exchange-Traded Funds (ETFs) this year.

Crypto-based ETFs have been banned in South Korea since 2017. In 2024, the country’s regulator reaffirmed its stance after the US Securities and Exchange Commission (SEC) approved the investment products. However, it has now cited the success of the US and Hong Kong’s crypto funds as a key factor for their shift.

The FSC will also accelerate the next phase of its digital asset legislation this quarter to establish a clear regulatory framework for stablecoins. As reported by Bitcoinist, South Korea’s Second Phase of the Virtual Asset User Protection Act was delayed until the start of 2026 due to an ongoing disagreement between the FSC and the Bank of Korea (BOK).

The financial authorities have been clashing for months over rules related to the issuance and distribution of stablecoins, disagreeing on the extent of banks’ role in the issuance of won-pegged tokens.

Nonetheless, the main policies of the crypto framework have been decided, set to include investor protection measures, such as no-fault liability for crypto asset operators and isolation of bankruptcy risks for stablecoin issuers.

Moreover, the country is lifting its long-standing ban on institutional crypto trading, which is anticipated to begin later this year. According to local reports, the FSC is considering a rule to limit corporate cryptocurrency investments at 5% of a company’s equity capital.

Under the latest proposal, eligible firms would be able to allocate up to 5% of equity capital per year to digital assets, limited to the top 20 cryptocurrencies by market capitalization. The final draft version could be released as early as January or February.

The CEO of Bank of America has warned that trillions of dollars could flee from bank deposits to the stablecoin sector if the upcoming crypto market structure bill allows interest payments on the tokens.

Banking System Could Face $6 Trillion Problem

On Wednesday, Bank of America CEO Brian Moynihan told investors that the banking industry could face significant challenges if the US Congress does not prohibit interest-bearing stablecoins.

During its Q4 earnings call, the executive affirmed that up to $6 trillion in deposits, around 30% to 35% of all US commercial bank deposits, could flow out of the banking system and into the stablecoin sector, citing Treasury Department studies.

The banking sector has heavily criticized the US’s landmark stablecoin legislation, the GENIUS Act, for months, claiming that it has loopholes that could pose risks to the financial system. Notably, the crypto framework prohibits interest payments on the holding or use of payment-purpose stablecoins but only addresses issuers.

Multiple banking associations across the US sent a joint letter to the Senate Banking Committee urging Congress to amend the law to include digital asset exchanges, brokers, dealers, and related entities.

According to the call’s transcript, Moynihan compared the digital assets to money market mutual funds, which require reserves to be held in short-term instruments, such as US Treasuries, thereby reducing lending capacity in the system.

That is the bigger concern that we’ve all expressed to Congress as they think about this, if you move it outside the system, you’ll reduce the lending capacity of banks. (…) And if you take out deposits, (…) they’re either not going to be able to loan or they’re going to have to get wholesale funding and that wholesale funding will come at a cost that will increase the cost of borrowing.

The CEO asserted that Bank of America would not be affected by this issue, as the institution would be able to “meet customer demand, whatever may surface.” However, he noted that it would particularly hurt small- and medium-sized businesses, as they’re “largely lent to end consumers by the banking industry.”

Stablecoin Rewards Debate Intensifies

Moynihan’s remarks come amid the Senate’s struggles with the long-awaited market structure bill. The recently shared draft, which was scheduled for a markup today, has raised concerns among crypto industry leaders, who have outlined multiple problems with the bill.

Coinbase’s CEO, Brian Armstrong, took to X to share his disappointment with the legislation, affirming that “this version would be materially worse than the current status quo. We’d rather have no bill than a bad bill.”

He affirmed that, after reviewing the bill’s draft, Coinbase could not support it in its current state, arguing that there were “too many issues.” Among the problems, he noted the de facto ban on tokenized equities, crucial DeFi prohibitions, the “erosion” of the Commodity Futures Trading Commission (CFTC)’s authority, and the policies regarding the payment of interests on stablecoins.

As reported by Bitcoinist, this version of the market structure bill introduced key restrictions for stablecoin issuers. Under the proposed changes, issuers would be able to offer rewards for specific actions, such as account openings and cashback.

However, they are prohibited from offering interest payments to passive token holders. To Armstrong, this “would kill rewards on stablecoins,” and allow banks to “ban their competition.”

Amid the intensified backlash, Senate Banking Committee Chairman Tim Scott announced on Wednesday that the bill’s markup had been postponed to “deliver clear rules of the road that protect consumers, strengthen our national security, and ensure the future of finance is built in the United States.”