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Circle CEO Jeremy Allaire rejected concerns that interest-bearing stablecoins could trigger bank runs, calling the argument “totally absurd” during a Thursday panel at the World Economic Forum in Davos.
Allaire said fears that stablecoin yields would drain bank deposits ignore the $11 trillion money market fund industry, which has coexisted with traditional banking for decades without causing systemic stress. His comments address criticism of stablecoin yield provisions in the proposed CLARITY Act, a bill that would establish federal oversight for digital assets in the United States.
The Circle CEO argued that stablecoin yields function more like loyalty rewards than competitive deposit products, and pointed to artificial intelligence as a future driver of stablecoin adoption through machine-to-machine payments
Allaire argued that Stablecoin yields are not large enough to drain bank deposits or undermine monetary policy. Instead, he said, modest rewards on digital assets function similarly to loyalty incentives already common across traditional finance.
“They help with stickiness, they help with customer traction,” Allaire said, adding that interest payments linked to Stablecoin yields are far from the kind of returns that would trigger systemic stress.
His comments come as policymakers in the United States debate the CLARITY Act, a proposed bill designed to establish a federal market structure for digital assets. Critics of the bill have raised concerns that Stablecoin yields could accelerate deposit outflows from banks, particularly during periods of economic uncertainty.
To counter that argument, Allaire pointed to government money market funds as a historical parallel that undermines the panic around Stablecoin yields. For decades, money market funds were accused of siphoning deposits away from banks—yet the banking system endured.
“There’s been roughly $11 trillion in dollar-denominated money market funds that grew under very different conditions,” Allaire said. “That hasn’t stopped lending.”
According to Allaire, the growth of money market funds demonstrates that alternative yield-bearing products can coexist with banks, a lesson he says critics of Stablecoin yields are ignoring.
Allaire also highlighted a structural shift that has little to do with Stablecoin yields lending itself is increasingly happening outside traditional banks. In the United States, much of GDP growth over recent economic cycles has been financed through capital markets rather than bank loans.
“Private credit and capital-market debt have been driving growth,” he said. “We want to build lending models on top of stablecoins, not compete directly with banks.”
That evolution, Allaire argued, makes it misleading to frame Stablecoin yields as a threat when the financial system is already diversifying its sources of credit.
Beyond regulation and banking, Allaire pointed to artificial intelligence as a powerful force shaping the future of Stablecoin yields and adoption more broadly. He said billions of AI agents will eventually require autonomous payment systems.
“There is no other viable option right now besides stablecoins for machine-to-machine payments,” Allaire said, noting that Stablecoin yields could become part of the economic logic guiding automated transactions.
Similar views surfaced elsewhere at Davos. Changpeng Zhao, the former CEO of Binance, said crypto-based payments could play a critical role in AI-driven commerce, reinforcing the long-term relevance of Stablecoin yields in digital markets.
The idea that AI could drive mass adoption of Stablecoin yields is not new. In September, Galaxy Digital CEO Michael Novogratz predicted that AI agents would become the largest users of stablecoins “sometime in the near distant future.”
Novogratz’s view supports Allaire’s broader argument: that Stablecoin yields are less about undermining banks and more about enabling new forms of economic activity that traditional finance struggles to support efficiently.
Still, debate over Stablecoin yields is unlikely to fade soon. Regulators remain cautious, particularly after recent banking stress events that heightened sensitivity around liquidity and deposit flight. Lawmakers weighing the CLARITY Act are expected to scrutinize how yield-bearing stablecoins should be supervised.
Allaire maintains that clear rules—not fear-driven narratives—are what the market needs. He said well-regulated Stablecoin yields could coexist with banks while expanding access to digital finance.
As discussions in Davos wrapped up, one message was clear: the argument that Stablecoin yields alone could trigger bank runs is losing credibility among industry leaders. With historical parallels, shifting lending patterns, and emerging AI use cases, the conversation is moving beyond panic toward practicality.
For Allaire, the issue is simple. “This is about building better financial infrastructure,” he said. And in that future, Stablecoin yields may prove to be less of a threat—and more of a tool shaping the next phase of global finance.
