America’s powerful banking lobby is “panicking” over the potential of stablecoins to disrupt their traditional business model, particularly when it comes to yield-bearing stablecoins, according to Austin Campbell, a New York University professor and founder of Zero Knowledge Consulting.

In a May 21 social media post that begins with, “The Empire Lobbies Back,” Campbell claimed that the banking industry is especially alarmed by the potential for stablecoins to offer interest or rewards to holders. 

In a pointed message aimed at Democratic lawmakers, Campbell wrote that “banks want you to protect their cartel so they can keep screwing your voters.”

He went on to explain how fractional reserve banking enables banks to maximize profits while offering depositors minimal interest.

The banking lobby says that if stablecoins pay interest or any other type of monetary reward, banks will be “harmed,” Campbell added.

An excerpt of Campbell’s X post. Source: Austin Campbell

“This is naked pandering for cartel protection,” he said while urging the opposition party to avoid “screwing” its voters with supporting any type of blanket ban on stablecoin interest payments.

Campbell has long advocated for sensible stablecoin legislation in the United States, warning a Congressional subcommittee in April 2023 that failing to enact such laws would push issuers overseas.

Related: Pareto launches synthetic dollar backed by private credit

The rise of yield-bearing stablecoins

Campbell’s scathing assessment of the traditional banking industry comes amid a wave of stablecoin issuers launching yield-bearing tokens. 

As reported by Cointelegraph, the US Securities and Exchange Commission (SEC) in February approved the first yield-bearing stablecoin security by Figure Markets. At the time of its launch, the new YLDS token offered a 3.85% yield. 

Figure Markets’ Form S-1 registration with the SEC for its yield-bearing stablecoin. Source: SEC

Figure Markets is by no means the only player going down the yield-bearing stablecoin route. 

In February, Tether co-founder Reeve Collins announced that his Pi Protocol will allow investors to mint the USP stablecoin in exchange for USI, an interest-paying equivalent. 

Spark Protocol’s USDS also offers holders interest payments generated through decentralized lending and tokenized Treasurys. 

Stablecoins have come a long way since October 2014, when Tether launched USDt. Source: S&P Global

“It’s unacceptable to not be receiving at least the risk-free rate for holding stablecoins,” Sam MacPherson, CEO of Spark Protocol developer Phoenix Labs, told Bloomberg.

Aside from Bitcoin (BTC), stablecoins have arguably become the most impactful use case for blockchain technology, with Coinbase Canada CEO Lucas Matheson telling Cointelegraph that global stablecoin volumes are nearly three times those of credit card giant Visa.

Related: Canada lags with stablecoin approach, but there’s room to catch up