A good conversation, but the stablecoin yield conversation misses the mark in a few spots and I think this is really important that the actual issues are understood, since so much hinges on it. Some thoughts: (1) "There's all these loopholes you can drive a truck through... we're overreacting" - The initial text did have large loopholes and Coinbase made a public statement that they were fine with this version. However, there were several amendments scheduled for the markup hearing supported by at least one (and likely a couple) Republican Senators that intended to meaningfully restrict this further, if not eliminate it completely (at least for CB). CB didn't mind the initial provision, but they knew amendments were likely to pass that DID restrict their ability to offer a yield product. Stablecoin interest income is a billion dollar revenue generator for CB and a core part of their future roadmap. Hard to say they had an overreaction in that case. (2) "Stablecoins are basically narrow banks, full reserve banks". - This is conflating terms. Reserves at a stablecoin issuer refer to all of the assets held to meet redemptions on 1:1 basis, consisting of bank deposits, treasuries, repo agreements, etc. Reserves at a bank are almost entirely deposits they hold at the Fed. There's no large stablecoin issuer that has an account with the Fed. This is an important distinction, because it means stablecoin issuers are actually more like money market funds (but they decide how interest is distributed) and have a limited ability to reduce aggregate deposit levels in the commercial banking system. A person converting their bank deposit to USDC or USDT is not putting it in a blackhole. A stablecoin issuer placing that cash into its reserves can, eg, decide to buy treasuries or deposit it into it's own banking account, which just cycles the deposit back into the commercial banking system to be used again in credit intermediation. (3) "In the absence of changing the rules, they would compete by raising interest rates they pay depositors." - This is true, and I mostly agree, but the mechanic is a bit more nuanced. As mentioned above, stablecoins don't reduce demand for deposits in the aggregate any more than a typical MMF, but they do reduce demand for cheap zero-interest transactional deposits (ie checking), since they act as a substitute payments layer. Yield-bearing stables additionally increase the rate-sensitivity of depositors, since their new stables "checking account" pays high savings rates. So as deposits cycle back through to the commercial banking system you have a double whammy of (1) checking deposits migrating to savings deposits and (2) savings deposits accelerating migration from low rate banks to high rate banks. Both increase funding costs for banks and reduce net interest margin. And to the extent aggregate deposits are reduced due to reserve composition, that would contribute as well. This dynamic has already existed in part with high rate e-banking and MMFs, but would almost certainly accelerate. I won't deny Coinbase is self-interested or that Valkenburgh is right to consider it tangential to his own interests, but there is certainly a general counterargument that this dynamic of converting banks from gatekeepers of the transactional substrate with huge rents to just another investment vehicle (and a poor fit at that) is perhaps one the highest impact effects crypto may have going forward.(Scott Johnsson)