Crypto Market Alert

A sharp drop in Bitcoin and other major coins coincides with bank warnings that new stablecoin rules could trigger large withdrawals.

Crypto Market Fears Grow as Wall Street Warns on Stablecoins

Bitcoin declined from about 124,000 per coin to around 114,000 as Ethereum and XRP also fell, pulling the total crypto market cap lower after a brief spike to roughly 4.2 trillion earlier this month. The retreat comes as traders weigh the impact of fast moving policy debates and a shift in market mood following mixed signals from big players.

Wall Street banks are urging Congress to close a loophole in the Genius Act that would allow stablecoin issuers to offer yields through affiliates. A Treasury Department report warned that such yields could spur deposit outflows totaling up to 6.6 trillion and further stress financial markets if investors move funds into crypto based stablecoins. The report also notes the stablecoin market could grow to about 2 trillion by 2028 from around 280 billion today. The message from banks and trade groups is clear; policy choices in this area carry real risk for funding, lending and consumer protection.

The episode highlights a clash between rapid crypto innovation and traditional financial safeguards. Regulation is catching up with a market that evolved faster than many rules. The debate over stablecoins centers on whether these digital dollars should be treated like cash or as a new financial instrument with different risk profiles. Expect policymakers to push for guardrails that preserve credit flow and market stability without stifling usable payment rails.

If rules swing too hard against stablecoins, lending costs could rise and banks may tighten credit for households and small businesses. If rules are too permissive, crypto driven volatility could spill into the broader financial system. The coming weeks will reveal how much political and economic pressure lawmakers are willing to bear as they balance growth with safeguarding the public’s money and trust.

Highlights

The policy world and the markets will test each other in the weeks ahead.