NYT article - Behind Wall Street’s Abrupt Flip on Crypto

Aug 14 • Defi

Have not read this article fully but Chat-g gave me a TL;DR. Talks about banks using stable coins which has been a hot topic in this circle.

Here is a gift link for the first few ppl to click and read without a NYT subscription

Main points

Big banks that once trashed crypto (Dimon, Moynihan, HSBC) are now racing to roll out crypto plans—especially stablecoins—and to brief investors and regulators about them.
The driver: politics (Trump-era pro-crypto stance), FOMO (Bitcoin >$100k), and fear of being outflanked by fintechs and retailers (Circle, Walmart, Amazon).
Banks are sketching an interbank payments/checking system using stablecoins. Execs privately worry it lacks mature consumer protections and oversight.

How bank-issued stablecoins would work

Customers swap dollars for bank stablecoins to send/receive money (e.g., cheaper cross-border payments).
By law (the GENIUS Act), stablecoin reserves must sit in Treasuries/cash—banks keep the interest; customers earn nothing.
No FDIC insurance: if a stablecoin fails, there’s no automatic federal backstop.

Impact on banking

Dollars parked in stablecoin reserves can’t be lent out like traditional deposits—shrinking deposit bases and loan capacity; the Kansas City Fed flagged possible economic side effects.
Some leaders warn even modest deposit flight could stress banks; others (e.g., Fifth Third’s CEO) think consumer checking is probably safe.

Context & history

Banks have dabbled for years (brokerage exposure, crypto-backed loans). JPM tested JPM Coin with limited traction.
JPM dug into 19th-century wildcat banking and found a history of fraud/failures—stabilized only once national bank notes unified currency—adding cautionary vibes.

What banks plan

Industry talks about one joint stablecoin (name TBD), while many also prep their own coins plus rewards programs.
None expected in market before year-end; strategies still in flux.
Bank of America confirmed it’s preparing “responses,” unsure whether to go solo or join a consortium.

Why it matters (forward look)

If bank stablecoins take off, expect cheaper, faster payments—but also lower deposit balances and pressure on bank lending economics.
Policy/regulatory gaps (insurance, consumer recourse, operational risk) are the big unknowns.

1 comment