If you’ve heard the word “stablecoin” and thought it sounded like something built for Wall Street or Silicon Valley — not places like Monticello or Maquoketa, Iowa, where my
family has been in community banking for 60 years — you’re not alone. In simple terms, a stablecoin is a digital token designed to stay equal in value to one U.S. dollar. Think of it as a digital version of cash, built to move quickly across the internet.
Used appropriately, these tokens could make payments faster and more efficient. That’s why Congress took action last year to bring stablecoins out of the shadows and establish guardrails. Lawmakers recognized two truths: The technology has real promise, and everyday consumers deserve real protections.
One rule in particular matters to communities like ours: Stablecoin issuers are prohibited from paying interest simply for holding their tokens. This wasn’t a minor detail — it was intentional. Stablecoins were meant to be payment tools, not substitutes for insured bank deposits.
Why does that distinction matter?
Because in community banking, deposits aren’t just numbers on a balance sheet. Bank deposits sit at the core of the U.S. financial system, supporting credit creation, monetary policy transmission and local economic development. They are the fuel for local lending. When families save at their community bank, those dollars become small-business loans, home mortgages, farm operating lines — the backbone of local economies. That cycle of “local savings powering local growth” is how our communities thrive.
Yet today, some technology firms are testing ways to sidestep Congress’ interest ban by offering so-called “rewards” through affiliated companies, or on the exchanges where they’re traded. Even if the token issuer isn’t paying interest directly, a partner platform might do it for them. To the average consumer, it looks and feels like earning interest — without the transparency, regulation, or protections people rightfully expect from a bank.
That’s the loophole policymakers are now wrestling with.
If dollars shift out of insured community bank deposits and into these token-based products, the consequences are real. A Treasury Department report suggests stablecoins, at scale, could divert trillions of dollars from traditional deposits. For a state like ours with well over $100 billion in deposits, that translates into potentially billions less in local lending. Less credit means fewer expansions, fewer home purchases, and slower economic growth right here at home.
This isn’t about resisting innovation. Community banks have embraced technology for decades, from online banking to instant payments. Our customers want fast, convenient ways to move money — we agree. Innovation is a good thing when it happens responsibly.
But responsibility is the point. Banks operate under strict supervision. We hold capital and liquidity. We undergo regular examinations. And critically, deposits are insured. When we pay interest, it’s tied to real lending that supports real economic activity.
By contrast, platforms offering “rewards” on stablecoin balances aren’t making small-business loans or home mortgages in Monticello or the towns around us. Yet their offerings can easily be mistaken for traditional interest — without the safeguards consumers rely on and without supporting local economies in any meaningful way. Additionally, volatility in the digital currency space could have negative systemic effects, not only on consumers’ access to their funds but also on the stability of the financial system as a whole.
That’s why community bankers across the country have asked Congress for one simple clarification: The rule prohibiting interest shouldn’t depend on who pays it.
If a payout walks like interest and talks like interest, it should be treated like interest — regardless of whether it comes from the stablecoin issuer or an affiliated company.
Congress deserves credit for its thoughtful, bipartisan work so far. Lawmakers have approached this fast-moving space with care, aiming to support innovation while protecting consumers. With one small adjustment, they can strengthen that balance.
Clear rules will give innovators certainty. They will prevent consumer confusion. And most importantly, they will ensure community banks can continue doing what they do best — lending locally and strengthening the communities we call home.
Stablecoins may well become part of the future of payments. But that progress shouldn’t come at the expense of the local lending that helps our towns grow and thrive. With clarity, fairness, and a continued focus on consumers, we can have both responsible innovation and strong community banks.
Abram Tubbs is CEO and chairman of the board at Ohnward Bank & Trust in Monticello and co-CEO of the parent company, Ohnward Bancshares in Maquoketa. He is also the current chairman of the Iowa Bankers Association.
