Stablecoin Rewards Could Drain Billions From Regional Banks, Warns Bank Executive

A South Dakota bank executive is sounding the alarm about the potential consequences of proposed stablecoin legislation. Nate Franzen, head of agricultural finance at First Dakota National Bank, warns that unless the CLARITY Act includes strict limits on stablecoin rewards, regional banks could be drained of deposits.

The CLARITY Act aims to create a federal framework for stablecoins, which are digital assets pegged to traditional currencies like the U.S. dollar. A key point of contention is whether stablecoin issuers and platforms can offer rewards or interest-like payments to holders.

Franzen argues that such incentives could make stablecoins more attractive than traditional bank deposits, especially if they are not subject to the same regulatory safeguards. He cites an estimate from the American Bankers Association suggesting that as much as $4.7 billion of the roughly $47 billion in deposits held by South Dakota regional banks could shift into stablecoins.