Jeremy Allaire at Davos: Stablecoin yields won’t spur bank runs

At the World Economic Forum in Davos on Thursday, Circle CEO Jeremy Allaire dismissed warnings that interest-bearing stablecoins could drain bank deposits. He called the idea of yield-driven runs “totally absurd” and argued that the incentives are too small to destabilize the banking system or monetary policy.

To support his view, Allaire pointed to the track record of U.S. dollar money market funds. He noted that assets in those funds have grown to roughly $11 trillion over multiple cycles without shutting off credit to the real economy.

He characterized interest and rewards linked to stablecoins as features that build customer loyalty rather than triggers for mass withdrawals from banks. “They help with stickiness, they help with customer traction,” he noted, adding, “Interest itself is not large enough to undermine monetary policy.”

The remarks came as policymakers and industry executives in Davos debated how interest on digital dollars should be governed. The discussions included references to the proposed US CLARITY Act, which seeks a federal market structure for digital assets.

Allaire also flagged artificial intelligence as a likely driver of future demand for digital dollars. He projected that “billions of AI agents” will need a way to pay and get paid and asserted that “there is no other alternative other than stablecoins to do that right now.”

As we reported earlier, Galaxy Digital CEO Mike Novogratz warned that a U.S. crypto market-structure bill is at risk because lawmakers and lobbyists can’t agree on whether stablecoin holders should earn yield. He said the fight reflects a turf battle over customer cash, with banks resisting yields on stablecoins that could compete with deposits.

Novogratz argued politics are overriding rulemaking and said banks and senators from both parties would bear responsibility if the bill fails. He added that consumers would lose as the market remains a gray area without legislation.