The rise of user-friendly stablecoins and DeFi platforms, distributed by Big Tech and major banks, will lead to the demise of smaller banks. Consumers will abandon institutions with clunky technology for superior, 24/7, AI-assisted digital finance, causing a mass extinction event for traditional local banks.

Banks oppose stablecoins because they disrupt a core profit center: the spread between low interest paid on deposits and high yields earned from investing those deposits in treasuries. Stablecoins can pass these yields directly to consumers, creating a competitive market.

Widespread adoption of blockchain, particularly stablecoins, has been hindered by a "semi-illegal" regulatory environment in the U.S. (e.g., Operation Chokepoint). Now that this barrier is removed, major financial players are racing to integrate the technology, likely making it common within a year.

A key provision in the crypto market structure bill, which could stall its passage, is the debate over allowing third parties to pay yield on stablecoins. Regulators fear this could trigger a mass exodus of deposits from the traditional banking system, while the crypto industry views it as essential for competition.

The term 'tokenized money fund' is misleading as it covers three distinct models: fully on-chain funds like BlackRock's BUIDL, traditional 2a-7 funds with new digital share classes, and new 'stablecoin money funds' designed specifically to manage stablecoin reserves under the Genius Act's conservative guidelines.

Beyond regulatory clarity, a critical hurdle for enterprise adoption of stablecoins is their accounting treatment. The Financial Accounting Standards Board (FASB) is currently deciding if stablecoins can be classified as cash equivalents on a balance sheet, a move that would significantly lower friction for corporate use.

Despite promising instant, cheap cross-border payments, stablecoins lack features critical for corporate treasurers. The absence of FDIC insurance, a single standard ("singleness of money"), and interoperability between blockchains makes them too risky and fragmented for wholesale use.

While stablecoins gain attention, tokenized deposits offer similar benefits—like on-chain transactions—but operate within the existing, trusted regulatory banking framework. As they are simply bank liabilities on a blockchain, they may become a more palatable alternative for corporates seeking efficiency without regulatory uncertainty.

To avoid being classified as a bank, Coinbase's stablecoin model offers "rewards" for user activity like payments or trading, rather than paying interest directly on balances. This is a crucial legal distinction under new regulations allowing them to pass on yield from treasury reserves.