heres the real reason why regulators/banks dont want to let stablecoins pass yield- it destroys fractional reserve banking as a system consider the unspoken truth that "narrow banking" is practically illegal in the US. no entrants who wanted to run a 100% deposit only business has been successfully able to get a fed master account. what this really means is that the US financial system is entirely built on the backbone of credit --> "if you dont originate credit, you dont get to become a deposit institution" take that one step further where "productive" credit can only be originated without 1:1 coverage ratio, the ultimate business of banking is always the same: maturity transformation between savers and borrowers. for this is the only way the fractional reserve system can ever exist, which means the fatal flaw of is built into the very system of yield mechanism put simply, the idea of having a stablecoin that passes yield is by definition completely contradictory to the banking model. you obviously can't simultaneously do fractional reserve stuff and also be 1:1 "stable" so the yield question isnt really about customer rewards and affiliate marketing, thats just convenient gaslighting. its really about the endless cycle of credit on an semi-unstable yet regulatorily captive deposit base that capitalism must perpetuate at all cost. its always liquidity transformation: create more duration so that the day of reckoning gets forever postponed. until one day it fantastically implodes.

so how do you avoid implosion? ironically, the answer is actually in stablecoin stablecoin that can take far more capital in from an untapped denominator previously unknown, so you can stuff it with more T-bills than ever before that denominator is foreigners who want dollars it just means that instead of time-based liquidity transformation, you engage in upfront notional transformation i suspect that in the long run that basically means the US needs a two-lane stablecoin market: one that is domestic without interest, and one that is foreign with some interest, but less than T-bills. americans will always have the option to earn better yield with a security wrapper than foreigners, but foreigners can also keep buying US debt to push out liquidity