The banking lobby is wrong about stablecoins and community banks

That may be effective political messaging, but it turns community banks into a convenient talking point in a much broader fight against competition. Congress should not kneecap one of the clearest advances in payment infrastructure to protect banks from a threat that has not been proven.

That threat sounds less convincing when community banks are understood on their own terms. They do not survive because customers lack another way to move money. They survive because of trust, relationships, and services that stablecoins do not replace. A farmer who relies on a local banker for seasonal credit, equipment financing, operating loans, and decades of institutional knowledge is not making the same decision as a fintech company choosing a faster settlement rail.

Community banks hold only about one-tenth of U.S. banking assets. But they make up more than a third of small business loans and nearly two-thirds of agricultural loans nationwide. That is why this debate should be about more than deposits.

The banking lobby’s argument treats stablecoins as if every dollar that moves onchain is a dollar leaving the banking system. That is not how the market actually works. Stablecoin activity still relies on banks, regulated issuers, custodians, payment companies and fiat access points. The question is not whether banks disappear. The question is which institutions adapt quickly enough to participate in the next phase of money movement.

Stablecoins are no longer a fringe market. Their total supply has exceeded $300 billion, and USDT₮, the largest stablecoin, briefly overtook Ethereum by market capitalization to become the second-largest digital asset behind bitcoin. Banks are right to pay attention.

But paying attention is different from pressuring Congress to slow the market down.

Stablecoins create new competition around payments, settlement, float, and customer relationships. Some of that competition will be uncomfortable for banks. It should be. Financial technology does not move forward only when incumbents are comfortable.

That does not make stablecoins a systemic threat to community banking.

There is a precedent for this. Over the last decade, fintech companies embedded banking features into consumer apps, business platforms, payroll tools, lending products, and payment systems. Many did so through bank partners. That changed how customers interacted with financial services. It created new competition. It pushed banks to modernize. But it did not wipe out community banking.

Fintech applications like PayPal and Stripe have popularized digital banking and built large user bases since their emergence. However, banks have never treated fintech as a threat, but rather as an opportunity to expand their offerings and improve user experiences through collaborations and integrations. Looking at the numbers alone, SoFi, the largest publicly traded fintech bank, had $37.5 billion in total deposits in the last quarter of 2025, accounting for less than 0.2% of the US bank’s $20 trillion deposit base. If fintech was never a threat, why treat stablecoins differently?

Stablecoins should be viewed in a similar way. They are not a bank run in disguise. They are a new payment and settlement layer.

The strongest use cases today are not about replacing a customer’s local checking account. They are about faster settlement, cross-border payments, treasury operations, programmable transactions and 24/7 liquidity. Those are real markets. They are growing quickly. But they are not the same thing as a rural depositor abandoning a trusted banking relationship.

That distinction should guide Congress as the Clarity Act moves forward.

The goal should be to protect consumers and markets, not to protect banks from every new form of competition. Community banks deserve a serious policy discussion. They should not be used as a shield for a broader incumbent argument.

Regulation should make the market safer and give clear rules of the road. It should not decide in advance which institutions get protected from competition.

Stablecoins are not coming for community banks. But financial infrastructure is changing, and Congress should not let an overstated fear decide who gets to participate in that future when passing the Clarity Act.