Bank-issued Stablecoins Constrict Credit Multiplier
The banking industry is undergoing a significant transformation as traditional banks transition into the stablecoin market. Notable examples include J.P. Morgan, which processes over $3 trillion through its Kinexys platform, and Société Générale, which issues EUR CoinVertible (EURCV) on public blockchains.
The introduction of bank-issued stablecoins has sparked debate about their impact on bank liquidity and lending capacity. According to the Bank for International Settlements (BIS), household demand for stablecoins leads to elevated deposit rates, increased bank funding costs, and reduced aggregate credit supply.
Under the GENIUS Act framework, payment stablecoins require 1:1 backing with eligible reserves, effectively converting a lendable financing source into a non-lendable reserve pool. This reduces the credit multiplier from approximately 9x to 1x on marginal dollars shifted.