Stablecoin rewards are a real threat to banks: Maple CEO

Sid Powell, CEO of Maple Finance, says that banks give a bad deal to depositors and are right to fear stablecoin rewards.

As Coinbase CEO Brian Armstrong ramps up lobbying efforts for stablecoin rewards, the battle lines between crypto and traditional banks are becoming clearer. Banks are worried about yield-bearing stablecoins.

According to Sid Powell, CEO of Maple Finance, the company behind SyrupUSD, the third-largest stablecoin yield product. They are offering a bad deal to customers, and profit massively from it, he said in an exclusive interview with crypto.news. Moreover, Powell denied that there are systemic risks to the financial system.

crypto.news: Recently, Coinbase CEO Brian Armstrong pushed for lobbying on stablecoin rewards and called out banks for trying to block it. Do you see regulations shifting to allow stablecoin issuers to operate more like banks? And what are the risks involved?

Sid Powell: It’s a good question. I don’t think stablecoin issuers will be allowed to act like full-fledged banks, unless they get banking charters. I believe Circle is pursuing one, or at least planning to.

The core issue is that banks are licensed deposit-taking institutions. They warehouse credit risk by originating loans for mortgages, business loans, credit cards, etc. To do that, they need capital reserves and strong credit underwriting capabilities. Most stablecoin issuers aren’t equipped for that. Their lending, if any, is typically overcollateralized and limited in scope.

So I think regulators will prevent stablecoin issuers from engaging in that kind of banking activity unless they formally become banks. It’s a completely different level of responsibility and regulatory oversight.

CN: So why are banks pushing back so hard against stablecoin rewards?

SP: Because the threat is real. If someone keeps their money in USDC on Coinbase and earns Treasury yield, they’re getting a better deal than they would from a checking account. Coinbase can offer those rewards because it’s not the issuer — Circle is. But Coinbase shares in the revenue Circle generates from holding Treasuries, and passes some of that back to users.

Meanwhile, if I keep money in a checking account, the bank pays me near-zero interest, even though they’re lending it out at 5, 6, 7%. That’s a massive spread for them. So, yes, this is a direct threat to their business model.

If people can start paying bills or using stablecoins directly from platforms like Coinbase, the role of banks, especially for everyday deposits, becomes much weaker.

CN: Is there a broader financial system risk if people start moving en masse from banks to stablecoins? According to the research by the BIS, consumers could move as much as $6.6 trillion worth of deposits to stablecoins.

SP: Not an immediate systemic risk, but there are second-order effects. If money flows out of banks and into stablecoins backed by T-bills, that money is essentially moving from the credit economy into government debt.

The issue is that you can’t run the entire financial system on T-bills. There’s a finite capacity for government borrowing, and more importantly, it means less capital available for home loans, business credit, and personal finance.

However, if that money flows into stablecoins and then into platforms like Maple, where we originate loans. It eventually comes back into the economy. Right now, we lend to crypto trading firms, prime brokers, and exchanges. But other platforms could emerge to support things like home loans or SME credit.

So, in time, a new credit origination ecosystem could form outside traditional banks. But the transition won’t be smooth. There will be a difficult adjustment period as capital shifts away from banks.

CN: Stablecoins are one of the biggest markets in crypto, but they’re still dominated by just two players: Tether (USDT) and Circle (USDC). How does Syrup compete with that?

SP: We don’t actually try to compete with them head-on. Syrup USD is built on top of both USDT and USDC, so instead of challenging them, we extend their utility. We offer Syrup USDC and Syrup USDT, which are yield-bearing versions of those assets.

Circle and Tether can’t offer yield directly due to regulatory restrictions, and stablecoins meant for payments can’t generate returns. That’s where we come in. We layer on yield by lending out the underlying stablecoins to institutional borrowers. They pay interest, and that yield flows back to the holders of Syrup USD (SYRUP).

So we see ourselves as complementary. We actually increase demand for USDT and USDC by making them more useful to yield-seeking users. Our product isn’t a stablecoin per se; it’s a yield product based on stablecoins.

Of course, the competitive landscape is evolving. Beyond Circle and Tether, you’ve now got Stripe with Tempo, PayPal, Ripple, all entering the space. It’s going to get more crowded, but that’s a good thing for innovation.