38 min ago4 min readSummer Mersinger is right about one thing: stablecoins have the potential to make payments faster and more global. She is also right that the United States should not regulate this technology out of existence.But as a South Dakota community banker, I was disappointed to see her dismiss the voices of banks like mine, suggesting in her recent CoinDesk op-ed that concerns about deposit flight and the loss of local lending were raised by “big banks” and too late in the legislative process. While that may be a convenient political narrative, neither is true.This issue matters to me and other small South Dakota banks, and we have been shouting it from the rooftops for more than a year. If Congress doesn’t tighten the Clarity Act’s restrictions on stablecoin rewards, small banks and the communities we serve will pay the price.Mersinger argues that concerns about stablecoins draining bank deposits are largely hypothetical. If a customer moves $100,000 from a bank account into a stablecoin, she points out, that money does not disappear. The stablecoin issuer must hold reserves, potentially including bank deposits and Treasury securities. The money remains in the financial system.That is true — and it misses the point.Some people may view our banking system as an abstraction where money and institutions are interchangeable, but the U.S banking system is the envy of the world because of its breadth, depth and diversity. The vast majority of our nearly 4,500 banks are very small, ensuring that every town in every corner of this country can access basic financial services.The reality is that most community banks will never hold a dollar of stablecoin reserves, but most community banks will lose deposits to stablecoin wallets. If my customer moves $100,000 from my bank into a stablecoin, and the stablecoin issuer buys Treasury securities to back it, I have lost $100,000 of funding for local credit — my bank and my community will see no benefit from that Treasury bill.The distinction matters enormously in a state like South Dakota, where community banks are deeply connected to the agricultural, ranching and small-business economies. The loans we produce may not be the nation’s biggest, but they are the economic lifeblood of the communities we serve.Smaller banks in this state currently hold about $47 billion in deposits at local branches. The American Bankers Association conservatively estimates that as much $4.7 billion of those community bank deposits could be drawn away by stablecoins if Congress doesn’t put reasonable guardrails in place. That would reduce lending capacity in our state by as much as $3.7 billion. Every one of those lost loan dollars means starting a business or getting a home loan in South Dakota will be that much harder.The most important issue isn’t whether stablecoin reserves technically stay within the banking system, as Mersinger argues. It is whether stablecoins become a substitute for bank deposits.That is where the proposed rewards regime becomes consequential — and tremendously damaging to the broader economy.The GENIUS Act prohibits stablecoin issuers themselves from paying interest. But unless the Senate tightens the yield language in the Clarity Act, an exchange or wallet provider can potentially provide rewards that are similar to interest. That ambiguity may appeal to Coinbase, but it will lead to years of litigation and uncertainty for the broader crypto sector. Even worse, it will put the economy at risk.If a consumer can earn several percentage points on a stablecoin while receiving the same basic dollar exposure and payment functionality, the product begins to compete directly with deposits. And unlike a community bank, the stablecoin issuer does not turn those funds into mortgages, farm loans or working-capital loans to generate its return. It can simply hold Treasuries. They also don't need to meet all of the rules and regulations that banks like mine face.That creates an uneven playing field: community banks would be forced to compete for deposits against products that can effectively pass through Treasury yields without performing the credit-intermediation function that banks perform. The end result will be fewer loans and less economic activity.None of this means Congress should stop stablecoin innovation. Quite the opposite. A sensible policy would preserve stablecoins as payment instruments while preventing exchanges and other intermediaries from using interest-like rewards to recreate high-yield deposit accounts outside the banking system. Transaction-based rewards, similar to what credit card companies offer, seem fair and reasonable to me.As someone who grew up in South Dakota before holding several important jobs in Washington, Mersinger should recognize the unique role that community banks play in our state and across the country. When a deposit leaves my bank, the question isn’t merely where that dollar goes next. The question is whether I still have the funding to say yes to the next local farmer, rancher or small-business owner who walks through my door.If Senators, including South Dakota’s two respected lawmakers, want me to keep making those loans and fueling our local economy, then they need to strengthen the Clarity Act before any final vote in September.Innovation deserves a level playing field. So does Main Street.Note: The views expressed in this column are those of the author and do not necessarily reflect those of CoinDesk, Inc. or its owners and affiliates.12345678910Anvil: The Missing Collateral LayerAnvil: The Missing Collateral LayerAnvil is a shared on-chain collateral layer built on a programmable letter of credit: reserve assets as a guarantee -no loan, no interest, keep custody & yield.Jul 29, 2026Anvil is a shared on-chain collateral layer built on a programmable letter of credit: reserve assets as a guarantee -no loan, no interest, keep custody & yield.Why it matters:Anvil is a shared on-chain collateral layer built on a programmable letter of credit: reserve assets as a guarantee -no loan, no interest, keep custody & yield.View Full Report