Stablecoins After the Hype: What Really Changed for Savers

The digital dollar that legally cannot pay you#

In August 2026, the average American savings account paid 0.38%, according to the FDIC's national deposit rate series. A three-month US Treasury bill paid roughly ten times as much. The three-month constant maturity rate closed August at 3.90%.

Stablecoins sit somewhere between those two things. They are dollars, held on a blockchain, backed almost entirely by Treasury bills. The money behind them earns the Treasury bill rate. Circle, the company that issues USDC, reported $668 million of reserve income in the three months to 30 June 2026, out of $701 million of total revenue and reserve income.

None of that went to the people holding the coins. Under American law it cannot.

A year after the rulebook arrived, the technology works and the regulation is serious. The thing an ordinary saver would most want from a digital dollar is the one thing the law rules out.

What a stablecoin actually is, and where the money goes#

A stablecoin is a digital token that promises to be worth one dollar, or one pound, or one euro. Unlike Bitcoin, it is not meant to move in price. The issuer takes your money, holds it in reserve assets, and gives you a token you can send to any compatible wallet.

The reserve is the whole business. Under the American rules, the FDIC's proposed rule of 10 April 2026 allows seven things and nothing else: coins and currency, balances at a Federal Reserve bank, insured bank deposits, Treasuries with 93 days or less to run, overnight repo and reverse repo against short-term Treasuries, and government money market funds holding only those assets. The reserve must fully back every coin outstanding, at all times.

Two terms are worth pinning down before we go further.

A repurchase agreement, or repo, is a short-term loan secured against government bonds. Overnight repo is about as close to cash as a financial instrument gets. Attestation is a limited examination by an accounting firm confirming that the reserve figures the issuer published are accurate. It is not the same as a full audit of the company.

Then there is the primary and secondary market split. When an issuer creates or destroys coins directly with a client, that is the primary market, and it happens at exactly one dollar. Buy on an exchange and you are in the secondary market, where the price is whatever supply and demand say. The two usually match. Usually is doing some work in that sentence.

What did change: stablecoins now have a rulebook#

The GENIUS Act was signed on 18 July 2025 and 2026 has been the year of turning it into regulations. The Office of the Comptroller of the Currency proposed its framework in March, the FDIC followed in April, and the Treasury published its rule on 18 August 2026, with comments closing on 19 October. From 18 July 2028, digital asset service providers may not offer payment stablecoins to US persons unless the issuer is permitted or a compliant foreign issuer.

What the framework delivers is not glamorous, but it matters. Issuers must publish their reserve composition monthly, have the previous month's figures examined by a registered accounting firm, and have the chief executive and finance chief certify the numbers, with criminal penalties for false certification. In an insolvency, holders rank ahead of the issuer's other creditors.

Britain has moved on a similar timetable with a different structure. The Bank of England published its policy statement on systemic sterling stablecoins on 22 June 2026. It dropped the individual holding limits the industry had complained about and replaced them with a temporary issuance guardrail of £40 billion per systemic stablecoin. Issuers may hold up to 70% of backing in short-term gilts, up from the 60% first proposed, with at least 30% at the Bank itself. The Financial Conduct Authority published its own rules for non-systemic issuance, policy statement PS26/10, on 30 June 2026, requiring full backing, redemption at par and backing assets held on statutory trust.

Three years ago a stablecoin holder was relying on a private company's word about assets nobody independent had checked. That is no longer the position.

What did not change: the interest belongs to somebody else#

Section 4(a)(11) of the GENIUS Act prohibits a permitted issuer from paying a holder "any form of interest or yield (whether in cash, tokens, or other consideration) solely in connection with the holding, use, or retention" of the coin. The OCC's proposed rule goes further, creating a rebuttable presumption of violation where an issuer arranges for an affiliate or related third party to pay it instead.

The commercial workaround is already running. As the same analysis notes, Coinbase pays rewards on USDC balances and PayPal does the same on PYUSD, both characterised as platform rewards rather than issuer interest. Whether that survives the final rules is still unresolved. The American Bankers Association and state banking groups asked the OCC in May 2026 to close what they call the yield loophole.

The case for the ban is that stablecoins would otherwise drain deposits out of banks, community banks especially, shrinking credit for local businesses. It is a serious argument that does not survive contact with the arithmetic. The White House Council of Economic Advisers modelled it in April 2026 and found that a complete prohibition would move about $54.4 billion into conventional deposits, of which roughly $2.1 billion would become new lending. That is 0.02% of total loans. On the paper's own welfare arithmetic, the exercise costs about $800 million net, with losses to consumers running 6.6 times the gains to borrowers.

Set against that, the market is small. At around $300 billion in February 2026, stablecoins amounted to under 2% of the $17.15 trillion sitting in US bank deposits. Tether accounted for roughly $185 billion of that and USDC about $75 billion.

Rates shown are recent observations, not forecasts, and none of this is a recommendation about where to put money.

What did not change: redemption at par is not really for you#

The promise is one coin, one dollar, on demand. The practice depends on who you are.

Tether's own redemption page states that the minimum redemption amount is $100,000 and requires a verified account with full anti-money-laundering checks. Researchers at MIT's Digital Currency Initiative found the same pattern across issuers: direct redemption is reserved for institutional clients with verified accounts, minimum sizes and approved jurisdictions, so most users cannot redeem with the issuer at all. Everyone else sells on an exchange at whatever the market offers.

In calm conditions the gap is trivial. In March 2023, when Circle disclosed that $3.3 billion of its $40 billion reserve was stuck at the failing Silicon Valley Bank, USDC traded down to $0.87 on secondary markets over a weekend when direct redemption was queued behind a backlog Circle cleared the following Monday. The reserve turned out to be sound. Holders who sold into the panic still took the loss.

The Bank for International Settlements makes the same point structurally in its 2026 Annual Economic Report, noting that secondary market prices deviate from par, mostly modestly, and that stablecoins therefore resemble exchange-traded fund shares more than a means of payment. That is an interpretation, and a contested one, but it follows from how redemption actually works.

The insurance question deserves a plain answer. Under the FDIC's proposal, reserves held at a bank are insured to the issuer as a corporate depositor, not passed through to coin holders. The FCA has warned consumers that cryptoasset holdings generally fall outside both the UK compensation scheme and the Financial Ombudsman Service.

What did not change: the payments revolution is still mostly ahead#

The strongest argument for stablecoins has always been cheap, fast cross-border payments. Sending $200 home still cost 6.36% on average worldwide in the third quarter of 2025, according to the World Bank's Remittance Prices Worldwide. For a family living on those transfers, that is real money.

So the Bank of Italy went and tested it. In a mystery shopping exercise published on 30 July 2026, researchers sent 200 USDC along ten corridors from Italy to Argentina, Brazil, South Africa, the United Arab Emirates and Japan. Total costs ranged from 0.30% to nearly 9%. The conclusion was that there is no systematic cost advantage over traditional channels. The blockchain transfer itself was cheap; getting money in at one end and out at the other was where the cost and the delay lived.

Volumes tell a similar story. The Financial Stability Board's deputy secretary general said in July 2026 that stablecoins accounted for less than 0.2% of cross-border payments in 2025. The BIS estimates $28 trillion of stablecoin transactions in 2025, which sounds enormous until you learn it is under three business weeks of settlement on the largest US wholesale payment systems, most of it crypto trading rather than anyone buying anything.

So where does that leave an ordinary saver?#

Better protected than in 2023, and still not paid.

The regulation is a real improvement and the people who spent years arguing for it were right. If you use stablecoins to move money, or you run a small business taking payment from abroad, the ground under you is firmer than it was.

What has not arrived is the thing the marketing implied: a dollar in your pocket that pays a Treasury bill yield and settles instantly anywhere. American law forbids the first half. The Bank of Italy's data suggests the second half depends far more on the payment systems at either end than on the blockchain in the middle.

Nothing here is investment advice, and none of it tells you what to do with your own money. But the question worth asking about any stablecoin product is a simple one: if the reserve is earning close to 4% and I am earning nothing, where is the difference going, and what am I getting in return for it?

Key takeaways#

1. US law bans stablecoin issuers from paying interest to holders. Circle earned $668 million of reserve income in the second quarter of 2026 while USDC holders earned nothing on the coins themselves.
2. The regulatory improvement is real. Full backing in a narrow list of assets, monthly reserve reports examined by accountants, executive certification with criminal penalties, and priority for holders in insolvency.
3. Direct redemption at a dollar is largely an institutional privilege. Tether's own minimum is $100,000. Everyone else sells on the secondary market at whatever it is paying that day.
4. There is no deposit insurance. FDIC cover protects the issuer as a depositor, not you as a holder, and the UK regime provides no FSCS protection.
5. The payments case is unproven so far. The Bank of Italy found stablecoin remittance costs of 0.30% to nearly 9% with no systematic advantage, and the FSB puts stablecoins at under 0.2% of cross-border payments.

Frequently asked questions#

Can I earn interest on stablecoins legally in the United States?

Not from the issuer. Some exchanges and payment platforms pay rewards on balances held with them, structured as platform rewards rather than issuer interest. The OCC has proposed rules that would presume a violation where an issuer arranges such payments through an affiliate, so the position may change.

Are stablecoins covered by deposit insurance?

No. The FDIC's proposed rule states that reserves held at a bank are insured to the issuer as a corporate depositor and are not insured to holders on a pass-through basis. The FCA has warned that cryptoasset holdings in Britain generally sit outside the compensation scheme.

What happens if the issuer goes bankrupt?

Under the GENIUS Act, stablecoin holders' claims rank ahead of the issuer's other creditors. That is better than being an ordinary creditor. It is not a guarantee of getting a dollar back, and insolvency proceedings take time.

Are stablecoins safer now than they were?

On the reserve question, considerably. Full backing in short-dated government paper, verified monthly, is a different world from unverified corporate assurances. Redemption access and the absence of insurance have not changed.

Is Tether as safe as USDC?

Federal Reserve staff reported in April 2026 that Tether held reserves of about 1.04 times coins outstanding, but that only around 0.74 times qualified as higher quality reserves such as Treasuries and bank deposits. USDC was fully backed by higher quality reserves. Under the Treasury's proposed rule, neither could be offered to US persons after 18 July 2028 unless its issuer meets the American requirements.

Should I use stablecoins to send money abroad?

That depends on the corridor. The Bank of Italy found costs varying by a factor of thirty across ten routes, driven mostly by the quality of the local payment system at each end. Compare the total cost of getting cash in and cash out, not the blockchain fee.

Why does the ban on interest exist at all?

To protect bank deposits and the lending they fund. The White House Council of Economic Advisers estimated the lending benefit at about $2.1 billion, or 0.02% of total loans, against a much larger cost to consumers. That is one model with its own assumptions, and the debate is live.

Will stablecoins replace bank accounts?

Nothing in the current data points that way. Stablecoins were under 2% of US bank deposits in February 2026, and the BIS finds most activity is crypto trading rather than everyday payments.

Glossary#

Stablecoin A digital token designed to hold a fixed value against a currency, backed by reserve assets held by the issuer.

Payment stablecoin The specific legal category created by the GENIUS Act, covering tokens used for payment or settlement and redeemable for a fixed amount of money.

Reserve assets What the issuer holds to back the coins. US rules limit these to cash, central bank and insured bank deposits, short-dated Treasuries, overnight repo and government money market funds.

Attestation A limited examination by an accounting firm confirming published reserve figures. Narrower than a full company audit.

Repurchase agreement (repo) A short-term loan secured against government bonds. A reverse repo is the same trade seen from the lender's side. Overnight versions are among the safest short-term instruments available.

Primary and secondary market The primary market is direct creation and redemption with the issuer at exactly par. The secondary market is trading between users on exchanges, where price moves with supply and demand.

Depeg When a stablecoin trades away from its intended value on secondary markets, as USDC did in March 2023.

Par redemption The right to exchange one coin for one unit of currency. In practice it is usually available only to verified institutional clients meeting minimum amounts.

References#

1. Board of Governors of the Federal Reserve System, "Stablecoins in 2025: Developments and Financial Stability Implications", FEDS Notes, 8 April 2026.
2. Council of Economic Advisers, Effects of Stablecoin Yield Prohibition on Bank Lending, April 2026.
3. Federal Deposit Insurance Corporation, GENIUS Act Requirements and Standards for FDIC-Supervised Permitted Payment Stablecoin Issuers, proposed rule, 10 April 2026.
4. US Department of the Treasury, GENIUS Act Regulations on Payment Stablecoin Issuance, Offer, and Sale, proposed rule, 18 August 2026.
5. Bank of England, Policy statement and draft rules on regulating systemic stablecoins, 22 June 2026.
6. Financial Conduct Authority, Cryptoassets regime policy statements, including PS26/10 on stablecoin issuance, 30 June 2026.
7. Banca d'Italia, "Are stablecoins efficient for remittances? Evidence from a mystery shopping exercise", Markets, Infrastructures, Payment Systems No. 86, 30 July 2026.
8. Financial Stability Board, Cross-Border Payments: Towards the Next Chapter, 8 July 2026.
9. Circle Internet Group, second quarter 2026 results, filed with the US Securities and Exchange Commission, 5 August 2026.
10. MIT Digital Currency Initiative, Jacobson, Samuel, Aronoff and Narula, "1:1 Redemptions for Some, Not All".
11. Tether, How to redeem Tether tokens to fiat currency.
12. Federal Reserve Bank of St Louis, National Rate on Savings Deposits (SNDR), August 2026.
13. Federal Reserve Bank of St Louis, 3-Month Treasury Constant Maturity Rate (DGS3MO), 28 August 2026.
14. World Bank, Remittance Prices Worldwide, Issue 54, September 2025.
15. Financial Conduct Authority, FCA reminds consumers of the risks of investing in cryptoassets.
16. American Bankers Association, "ABA, state bankers associations urge OCC to close yield loopholes in stablecoin rule", May 2026.