PRESIDENT’S MESSAGE If you follow financial markets, you have probably heard plenty about stablecoins and perhaps assumed they have little relevance to Colorado communities. Yet, how stablecoins are utilized and regulated could have significant consequences for consumers, small businesses and local economies across our state. First, a quick explanation: A stablecoin is a digital token designed to maintain a stable value (typically one U.S. dollar). In practical terms, it functions as a digital payment instrument that can make moving money online faster and easier. That potential is worth embracing. Traditional payment systems can be slow and cumbersome, and stablecoins could offer consumers and businesses another efficient way to transact. But innovation must come with appropriate safeguards, particularly when new financial products begin to resemble traditional banking products. Congress recognized that challenge when it passed the GENIUS Act, establishing a federal framework intended to bring payment stablecoins into the financial mainstream under clear rules. One provision is especially important: Stablecoin issuers cannot pay consumers interest simply for holding their tokens. That distinction was intentional. Stablecoins were designed and regulated as payment tools — not deposit accounts. Why does that matter? Money deposited in a bank does more than sit in an account. Deposits provide the foundation for lending. Banks use those funds to extend credit to families buying homes, entrepreneurs starting businesses, farmers purchasing equipment and companies expanding and creating jobs. Deposits fuel a cycle in which local dollars are put back to work in local communities. Stablecoins serve a different purpose. Their value lies primarily in facilitating payments, not generating the lending activity that supports broader economic growth. Yet some stablecoin companies and affiliated platforms have explored offering consumers “rewards” or similar payments for holding stablecoins. Whatever those payments are called, they can look very much like interest to consumers. They may encourage people to move money out of insured bank deposits and into token-based products that do not operate under the same regulatory framework or provide the same protections as bank accounts. That creates consequences far beyond the digital-asset market. If significant amounts of money move from bank deposits into stablecoins, banks have fewer deposits available to support lending. National estimates suggest such a shift could move trillions of dollars away from traditional bank deposits. Here in Colorado, estimates indicate that using stablecoins as a substitute for deposits rather than primarily as a payment tool could reduce lending capacity by approximately $2.3 billion to $4.6 billion. Those are not simply numbers on a balance sheet. Reduced lending capacity can mean higher borrowing costs and less access to credit for Colorado families, farmers and small businesses. Our concern is not about resisting innovation. Banks have embraced financial technology for decades, from online and mobile banking to instant payments. Innovation that gives consumers better, faster and safer ways to manage their money is good for our industry and our customers. By Jenifer Waller, CEO, Colorado Bankers Association Keep Payments Innovative and Community Lending Strong Colorado Banker 4
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