1. The checking account story
2. Microwaves and radios
3. The pattern
4. Stablecoins at step one
5. What comes next
6. Don't evaluate stablecoins on today's constraints

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The history of banking is a dance between banks and regulators, as regulators attempt to coerce banks to be safer and banks improve their compliance processes and their risk management to get closer and closer to the edge of the envelope — and do riskier things. Ultimately this may in fact make the world a riskier place, although banks also seem to be better at managing risk.

This dance has a pattern. If you can see the pattern, you can predict where stablecoins are headed.

The checking account story

In the US we have checking accounts and savings accounts — two different account categories. I'm mentioning this because of a detail that most people don't know: checking accounts, because of their nature as a frequently-withdrawn-from deposit type, were never allowed to offer any interest.

Sound familiar?

This is exactly the same debate we're having now with stablecoins. The Genius Act, in its current form, does not allow stablecoin yield to be passed through to holders. Banks lobbied for this. They argue that yield-bearing stablecoins would pull deposits out of the banking system. They're probably right. But history suggests this restriction won't last.

Microwaves and radios

In the 1980s, as inflation went from 5% to 10% in the US and interest rates were often above 12%, banks knew they needed to appeal to consumers. But they were stuck in the eyes of regulators and not allowed to give interest on checking accounts. So what did they do?

They started giving people radios. And microwaves. And TVs. Physical goods as rewards for opening accounts, because they couldn't offer the one thing consumers actually wanted: a return on their money.

This is the kind of contortion that happens when regulation lags consumer demand. The underlying need — to be compensated for holding money somewhere — doesn't go away just because regulators say no. It finds other outlets.

The pattern

Here's the pattern I see repeating across the history of US banking:

1. Regulators start conservative. They require high reserves, restrict what banks can do with deposits, and limit risk-taking. This makes sense — regulators are still learning how the system works, and conservatism protects depositors.

2. Banks prove competence. Over time, banks develop better risk management tools, better compliance processes, better technology. They demonstrate that they can handle more complexity safely.

3. Regulators loosen the constraints. Seeing that the system hasn't collapsed and that banks are managing risk effectively, regulators gradually expand what's allowed. Reserve requirements come down. New product categories are approved. Interest restrictions are lifted.

4. Banks push further. With the new freedom, banks innovate — sometimes wisely, sometimes not. They get closer to the edge of the envelope. New risks emerge.

5. Repeat. Eventually there's a crisis (sometimes), regulators tighten again, and the cycle restarts at a higher baseline.

Certainly today in the US we have zero reserve requirement for some types of deposit balances. There's no way that a banker in the 1920s would have been able to manage that. You just wouldn't have been able to move liquid collateral fast enough to handle any sort of large, or even small-scale redemption, with that kind of bank balance structure. The fact that we can manage it now is evidence that risk management has genuinely improved.

Stablecoins at step one

Stablecoins are at step one of this dance. Regulators are starting conservative, and for good reason.

The Genius Act requires high quality liquid assets — the best possible assets you could have. You should be able to unwind any stablecoin issuer in three days because you can sell $160 billion of Treasuries into the market. The market can actually take that. And so it requires much less regulation because you don't need to do full risk assessments. Regulators already know the market can handle these assets, and so it's viewed in good faith as an asset that can be liquidated.

No yield. Full collateral. Simple diligence. This is the stablecoin equivalent of high reserve requirements in early banking.

There's also a strong preference among regulators for clearinghouses over exchanges. State regulators don't like the idea of people doing payments through gambling websites — that's the reputational taint that crypto exchanges carry. They're also deeply suspicious of a world where stablecoins are issued by two or three private companies. They want to see anti-fragility in stablecoin issuance, which means a diverse set of issuers and infrastructure that isn't dependent on centralized exchanges. This is why clearinghouses, not exchanges, are the regulatory-preferred path for stablecoin interoperability.

From a concentration standpoint, the regulatory posture is converging on something familiar: no single issuer should control more than about 35% of the market — the same framework that governs the GSIBs. Everyone who isn't Circle or Tether has realized the goal isn't to win the market. The goal is to get 15% of it.

What comes next

We've slowly opened up the aperture of what's allowed in these balances. In large part because regulators have gotten more satisfied with banking compliance structures and with their literal ability to manage risk. And then also because consumers just demand it over time.

If the pattern holds — and I think it will — here's what happens with stablecoins over the next decade:

Near term (1-3 years): Stablecoins stay conservative. HQLA backing, no yield, strict compliance. Regulators build familiarity with the space. Issuers demonstrate reliable operations, transparent reserves, and clean audits. The proof that this is happening in real time: I spent a day at BNY Mellon's office, and they told me that "if you nail every milestone, we could get live by February 2027." That's step two of the dance — banks proving competence with stablecoin infrastructure — playing out right now, with one of the world's oldest financial institutions.

And it's not just custodians. Zelle — the bank-owned payment network that has surpassed Venmo in transaction volume — is building a digital asset team from scratch. Their first initiative: using stablecoin rails to enable international Zelle payments. The owner banks lack global liquidity for direct international transfers, so the plan is fiat-to-fiat payments with stablecoin infrastructure behind the scenes. The rollout strategy is classic bank: prove it with one or two owner banks, expand to all seven, then distribute to the 2,500 member banks in the network. Notably, this is protection-focused — they're not chasing a new revenue stream. They're preventing yield and payment flows from draining out through Coinbase and other external platforms.

Medium term (3-7 years): The aperture widens. Regulators may allow a broader set of collateral — perhaps including high-grade corporate bonds or agency securities. Some form of yield-sharing may be permitted for institutional holders, then retail. Stablecoin issuers start looking more like money market funds.

Longer term (7-15 years): Deposit-backed stablecoins become feasible. Banks issue their own stablecoins, backed by fractional reserves, overseen by existing banking regulators. Stablecoins begin to participate in credit creation. The line between a stablecoin and a bank account blurs.

Don't evaluate stablecoins on today's constraints

The mistake most people make — including many people in crypto — is evaluating stablecoins based on what they can do today. No yield. Full collateral. Limited interoperability. They compare stablecoins to bank accounts and find them lacking.

But the comparison isn't fair. You're comparing a system at step one of the regulatory dance to a system that's been dancing for 150 years. Of course bank accounts have more features. Of course they're more capital-efficient. They've had a century and a half of loosening to get there.

The right question is: what will stablecoins look like after they've gone through the same evolutionary process? If the pattern holds, the answer is: substantially more powerful than they are today, with broader collateral, yield, and credit creation — but built on a foundation that's faster, cheaper, more transparent, and more programmable than anything banks have managed to build.

The banks should have been building this. There's no reason they couldn't have. But they didn't. And so the dance is starting over, with new dancers.

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Quotes

The dance defined

Source: Sam Broner / Common Prefix — Jan 20, 2026

The history of banking is like a dance between banks and regulators, as regulators attempt to coerce banks to be safer and banks improve their compliance processes and their risk management processes to get closer and closer to the edge of the envelope. And do riskier things, and ultimately this may in fact make the world a riskier place, although they also seem to be better at managing risk.

Checking accounts and the interest ban

Source: Sam Broner / Common Prefix — Jan 20, 2026

In the US we have checking accounts and savings accounts with our banks through two different account categories. Checking accounts, because of their nature of being frequently withdrawn from deposit type, were never allowed to offer any interest. Exactly the same debate that we're having now with stablecoins.

Microwaves as rewards

Source: Sam Broner / Common Prefix — Jan 20, 2026

In the 80s, banks, knowing they needed to appeal to consumers but were stuck in the eyes of regulators and not allowed to give interest, started giving people like radios and microwaves and TVs and stuff in order to give them rewards.

Zero reserves today

Source: Sam Broner / Common Prefix — Jan 20, 2026

Certainly today in the US we have zero reserve requirement for some types of deposit balances, and there's no way that a banker in the 1920s would have been able to manage that. You just wouldn't have been able to move fast enough — liquid collateral fast enough — to handle any sort of large, even small-scale redemption with that kind of bank balance structure.

The aperture widens

Source: Sam Broner / Common Prefix — Jan 20, 2026

We've slowly opened up the aperture of what's allowed in these balances. In large part because regulators have gotten more satisfied with banking compliance structures and with their literal ability to manage risk. They've gotten better at it. And then also the consumers just demand it over time.

Yield will come

Source: Sam Broner / Common Prefix — Jan 20, 2026

I'm actually kind of indifferent. I don't really care. Ultimately, I know there will be yield if stablecoins become a major part of the economy because consumers will demand it, risk practices will improve.

HQLA as step one

Source: Sam Broner / Common Prefix — Jan 20, 2026

Stablecoins are going to start with high quality liquid assets — the best possible assets. In theory, you should be able to unwind any stablecoin issuer in three days because you can sell $160 billion of Treasuries into the market. The market can actually take that. And so it requires much less regulation because you don't need to do full risk assessments. Regulators already know the market can handle these assets, and so it's viewed in good faith as an asset that can be liquidated.

The seigniorage game

Source: 30 min with Sam (Marco Macchiavelli) — Feb 5, 2026

Marco: Two things — one is seigniorage. That's why Tether has 99% net interest margins. Now, Circle is basically deploying that seigniorage back to Coinbase through these revenue sharing agreements. But in DeFi, you have this magic of basically you can earn interest twice — on the seigniorage and on lending in DeFi. Who is borrowing in DeFi? People taking leverage long positions. So that is unstable.

The banks squandered it

Source: Sam Broner / Common Prefix — Jan 20, 2026

I'm not really a bank lobby apologist. I think they squandered what should have been a great lead. Like they should have been building stablecoins. There's no reason they couldn't have done this. I'm very frustrated with them. But as it is, stablecoins are better, faster, cheaper. They're global, they're programmable.

Customers Bank: regulators are deeply suspicious of concentration

Source: Better Money / Customers — Jan 14, 2026

Sam: I've got verbal agreement from five of the top ten issuers. We're beginning design partnership discussions with a couple of brand-name fintechs. What gave us the confidence to run at this very fully is that the issuers just had turned a corner. There's this realization that — if you just think about how the GSIBs work, we're not going to end up with one stablecoin issuer with above 35% market share. That's our regulatory framework. And then also everyone who's not Circle and Tether has realized the goal is not to win the market. The goal is to get 15% of the market.

BNY Mellon: two years to go live

Source: Better Money / Customers — Jan 14, 2026

Sam: I spent the day at BNY Mellon's office. They're really excited to work with us. We talked about a potential roadmap for working together. And I was like, let's just try it off this thing path here to see if there's any world in which even if you said you want to work with us, we could. And they're saying if you nail every milestone, we could get live by February 2027.

Zelle goes international on stablecoin rails

Source: Caroline Bagby / EWS / Zelle — Jan 27, 2026

Caroline (EWS): The original remit of what I'm going to be doing is just enabling Zelle to go international. It's actually fiat to fiat — using stablecoin rails to do that — because EWS as a whole, the owner banks don't have the global liquidity to enable that.

Sam: And the goal would be to go bank to bank for the top banks, or actually international across any bank?

Caroline: It would be like the seven owner banks get on board — they'll do a proof with one or two owner banks that want to be first out — and then it is distributed to the 2,500 member banks that are part of the network.

Regulators don't want exchanges — they want clearinghouses

Source: Better Money and Lead | Flow of Funds and partnership — Dec 18, 2025

Sam: We've got really good positioning with the state regulators because they want to know that the fintechs who are working with stablecoins don't need to interact with centralized exchanges. I think it's partially reputational — they just don't like the idea of people doing payments through gambling websites. The second thing is they are deeply suspicious of a world where stablecoins are issued by two or three private companies. They want to see a level of antifragility in terms of stablecoin issuance.