Bitwise CIO Urges Banks to Compete With Stablecoins by Offering Better Rates

Mat Hougan, Chief Investment Officer of Bitwise, has urged the U.S. banks to stop lobbying against stablecoins. Instead, he advised the banks to offer higher interest rates on deposits to customers. In a post on X.com, Hougan stated that if community banks are concerned about losing deposits due to stablecoin competition, then they should reward the depositors fairly.

He posted: “If local banks are worried about competition from stablecoins, they should pay more interest on deposits.” He also commented that the banks’ concerns reveal a history of “abusing depositors as a free source of capital for decades.”

Mat Hougan Urges Banks to Reward the Depositors Fairly

Mat Hougan’s remarks follow recent warnings from Wall Street institutions. Last month, Citibank suggested that yield-bearing stablecoins could trigger a wave of withdrawals from smaller banks, many of which rely heavily on retail deposits for lending. At the same time, banks have been lobbying Congress to tighten restrictions on stablecoin issuers, particularly around their ability to offer yields.

Hougan dismissed reports that stablecoins could “destroy” local lending markets, calling such speculation simplistic. Responding to a Bloomberg article that highlighted workers being paid in stablecoins, he said fears that bank credit would “dry up” are misguided.

“Classic first-order thinking,” Hougan wrote. While fewer deposits might reduce banks’ lending capacity, he argued that decentralized finance (DeFi) platforms will still allow stablecoin holders to provide credit directly to borrowers. “The loser here is bank profit margins. The winner here is individual savers. The economy will be just fine.”

The comments come amid growing consumer interest in stablecoins as an alternative to savings accounts. According to Bankrate data, the average U.S. savings account offers just 0.6% interest, with the highest-yield accounts around 4%. By contrast, some crypto platforms advertise up to 5% returns on stablecoin deposits.

Factoring in inflation and bank fees, Hougan and other crypto advocates argue that many depositors are effectively losing money by keeping cash in traditional banks. Stablecoins, meanwhile, promise not only better yields but also faster and cheaper transactions without holding fees.

The banking industry has urged lawmakers to close what it calls a regulatory “loophole” that lets stablecoin issuers offer yields. The proposed GENIUS Act has become a flashpoint between banks and crypto advocates. Industry voices warn that excessive restrictions would entrench traditional banks’ advantage at the expense of innovation and consumer choice.

Hougan’s blunt advice to banks was clear: compete for depositors by offering better value, rather than fighting to stifle stablecoin adoption.