Circle chief executive Jeremy Allaire has brushed aside concerns that interest-bearing stablecoins could trigger bank runs, calling the idea “totally absurd” during a panel at the World Economic Forum, and arguing that similar financial products have long existed without destabilizing the banking system.
Stablecoin yields and the bank-run debate
Speaking in Davos, Allaire rejected claims that paying interest on stablecoins could pull deposits out of banks at scale. He said the incentives offered by stablecoin issuers are modest and unlikely to disrupt monetary policy or traditional lending.
According to Allaire, rewards on digital dollars mainly improve user retention and adoption rather than encourage mass withdrawals from banks. In his view, the fears now surfacing echo past warnings that failed to materialize.
A familiar argument from traditional finance
To make his case, Allaire pointed to government money market funds, which faced similar criticism when they gained popularity. Those funds now hold roughly $11 trillion, yet banks continue to lend and credit markets remain active.
He added that much of U.S. economic growth in recent decades has already been financed outside the banking system, through private credit and capital markets. Stablecoins, he said, simply extend that long-running shift rather than threaten it.
Why AI could become stablecoins’ biggest user
Allaire also tied the future of stablecoins to artificial intelligence. He said billions of autonomous AI agents will eventually need native payment rails, and today’s systems are not designed for that scale or speed.
In his view, stablecoins are the only practical option for machine-to-machine payments. Former Binance CEO Changpeng Zhao and Galaxy Digital’s Michael Novogratz echoed the idea at Davos, predicting that AI could soon become one of the largest sources of stablecoin demand.