Galaxy Brains Podcast Summary
Episode: The Banks are Wrong on Stablecoin Yield with Omid Malekan
Host: Alex Thorn (Galaxy Digital Research, Head of Research)
Guests: Omid Malekan (Columbia Business School), Bimnet Abibi (Galaxy Trading)
Date: February 19, 2026
Episode Overview
This episode dives deep into the ongoing debate over stablecoin yields, especially focusing on the banks’ position regarding restrictions on yield for stablecoins as part of the Clarity Act negotiations. Alex Thorn is joined by Omid Malekan, a professor at Columbia Business School with extensive experience in both banking and crypto, for a robust discussion critiquing the traditional banks’ views on stablecoin risks and competition. The episode also includes a timely macro and bitcoin market update from Bimnet Abibi of Galaxy Trading.
Key Segments & Timestamps
- [05:42] — Bitcoin & Market Update with Bimnet Abibi
- [20:51] — Omid Malekan Interview Begins
- [23:15] — Regional Banking Crisis & Deposit Flight
- [31:53] — Stablecoins, Genius Act, and Payment Innovation
- [38:39] — Stablecoin Yield Debate & Bank Arguments
- [55:07] — How Stablecoins Might Affect Community Banks
- [72:31] — Education & Crypto Adoption at Columbia
- [75:54] — Closing Thoughts
Market & Macro Update with Bimnet Abibi
[05:42 – 20:45]
Bitcoin Market Outlook
- Cautious stance on Bitcoin: Bimnet sees value in the 59k (“200 week moving average”) area, expecting potential bounces but warning that further downside is possible, especially if broader equities correct.
- Historical context: Bitcoin bear markets often retest previous support levels multiple times and sometimes break below them with patience recommended for investors.
- Quote:
"I'm very cautious still. I think in terms of safe buy area, it's still kind of like the 200 week moving average at that 59k level." — Bimnet [06:28]
- Capitulation not seen yet: Despite liquidations, Bimnet notes we haven’t seen the full capitulation typically associated with durable market bottoms.
"It didn't feel like everyone's throwing in the towel on crypto. And that's normally how markets bottom..." — [11:32]
- Adoption still strong: Optimism for crypto rails in traditional finance, with stablecoins prominent and legislation progressing.
Macro & Geopolitics
- Rotation into 'real world' sectors: Industrials, hardware, and non-US equities are outperforming as capital rotates away from big tech/software.
"There's generally a lot of rotation into industrials and energy and like real world." — [13:31]
- Geopolitical risk: Discusses impact of potential US-Iran escalation, expecting a short-lived risk-off move in markets if a strike occurs.
"Maybe S&P down like a percent and a half to 2.5%. That probably gets bought. Vix probably spikes to like high twenties..." — [15:32]
Main Interview: Omid Malekan on Banking, Stablecoin Yields, and Policy
[20:51 – 76:13]
The Regional Banking Crisis & ‘Deposit Stickiness’ Myth
[23:15 – 31:53]
- Deposit flight is not a crypto problem: Fast deposit flight at SVB and First Republic was due to fintech, not crypto.
"Clearly deposits were a lot less sticky than everybody had assumed." — Omid [21:57]
- Misplaced blame: Regulators and politicians attempted to frame crypto as a key risk, but the real problem was systemic; pressure on crypto banks like Signature and Silvergate was politically motivated.
- Operation Choke Point 2.0: Regulatory pressure forced crypto industry deposits into just a few banks, amplifying fragility.
- Unprecedented regulator conduct:
"This is one of the most irresponsible things bank regulators in this country have ever done. Because... you publicly never, ever talk about deposits being risky." — [27:10]
Stablecoins, Genius Act, and Payment System Evolution
[31:53 – 38:39]
- Genius Act as "narrow banking":
"Genius is a remarkable bill... It drastically expands [options] and makes available something... a narrow banking option." — [31:53]
- Stablecoins replace legacy banking: Legacy banks had ‘always-on’ networks for payments (SEN and Signet), but stablecoins—moving over global, permissionless rails—have fully replaced such systems for the crypto sector.
- Public blockchain innovation: Permissionless, trustless payments and self-custody are the true advances, not simply faster payments.
"The core innovation is the changing nature of the trust assumptions." — [36:04]
Banks' Anti-Stablecoin Yield Arguments Debunked
[38:39 – 62:31]
Bank Claims
1. Deposit Flight
- Banks claim stablecoin yield will drain deposits, destabilizing traditional banks—especially community banks.
"Banks... say there will be stable coins will result in all this deposit flight out of the banking system... which is hilarious because that's not actually possible." — Alex [43:01]
2. Loss of Cheap Credit
- They warn a reduction in cheap bank funding will raise loan costs and reduce credit to small businesses and households.
3. Systemic Destabilization
- Yield-bearing stablecoins could, they argue, create new risks for the broader economy.
Omid’s Counterpoints
- Minor role of banks in credit:
"Banks in the US create a minority of credit. They only account for approximately 20% of loans to the private sector." — [44:11]
- Cheap funding = bank profits, not cheap loans:
"When banks have access to cheap deposits, they just make more money." — [49:52]
- Credit terms not improving for consumers: High consumer loan rates (credit cards, auto, mortgages) are near all-time highs, even while deposits pay very little.
"Credit card interest rates are on average over 20% ... and credit cards are the most widely available type of bank issued credit in America." — [47:23]
- Excess cash parked at Fed, not lent out:
"A substantial portion of the balance sheet of banks... is going into things where there's zero underwriting. ... Like if you park your money at the Fed and... the Fed will pay banks 3.6% to take money out of circulation." — [51:45]
- Stablecoin adoption’s actual effect: Stablecoins “recycle” dollars through the banking system, rather than pulling them out, especially since underlying collateral is held in bank accounts or treasuries.
Quote of the Segment:
"The argument that they'll be deposit flight... I think I'd say eviscerated across a couple vectors. One, they're not the biggest source of lending. ... Two, they're not actually doing the cheap lending really ... they're just clipping it as NIM [Net Interest Margin]..." — Alex [52:25]
Community Banks: Victims or Human Shields?
[55:07 – 62:31]
- Banks invoke community banks but act against them: Big banks claim stablecoins will kill small banks, all while expanding into their markets and taking deposits.
"Big banks are using the community banks as human shields." — Omid [60:49]
- Community banks already pay more interest; have sticky deposits: Local relationships, older demographics, and higher yields mean they’re less vulnerable to competition from stablecoins than large banks claim.
Policy and the Fight Over Stablecoin Yield
[62:31 – 71:56]
- Yield restriction: A last-ditch lobbying stand: The bank lobby is pushing for absolute bans on any yield (even beyond what the Genius Act enforced), out of self-interest, disregarding consumer benefit.
"The banks put out... a one page set of principles which said, ban all stablecoin yield." — Alex [65:53]
- Risks of giving in to banks:
"If the tradfi world gets what it wants on this issue, it will come for things like defi and permissionless systems next." — Omid [67:28]
- Potential for backsliding via must-pass legislation: Analogous to previous 'broker rule' sneaking into other bills, giving way once could open the door to further restrictive measures.
"[T]hey will continue to innovate roundabout ways of trying to kill [DeFi]." — [69:23]
- Patriotic irony: If Americans are forbidden to earn interest on US stablecoins but foreign holders do, it’s paradoxically anti-American.
"...Americans hold a dollar stablecoin... get no interest. Foreigners hold a dollar stablecoin, they get 2%, 3%. Meanwhile, where does the yield come from? It comes from treasury bonds. Who pays the interest on treasury bonds? Americans." — Omid [64:11]
Education & Crypto Adoption at Columbia
[72:31 – 75:54]
- Crypto never more popular with MBAs:
"Interest is actually at an all time high... as measured by how many people sign up for my class, the waitlists, ... It's literally been up only." — Omid [73:19]
- Students now see crypto as part of their future careers: Shift from skepticism to broad acceptance (with 10-20% outright ‘believers’ and would-be crypto professionals).
- Hands-on approach: When prices crash, students watch trading activity live as class material.
Notable Quotes
- On banking fragility:
"Eliminating bank runs and banking crisis to me is an unsolvable problem... Maybe we should move to a less levered banking system." — Omid [22:53]
- On the real innovation:
"The core innovation is the changing nature of the trust assumptions...all of the cryptographic features...are almost irrelevant, if you permission the validator set..." — Omid [36:04]
- On the lobbying position:
"They say stablecoins will kill community banks. That's our job." — Alex [62:31]
- On legislative risk:
"If we're gonna lose it, I wanna lose it on genuine grounds... Don't give me this song and dance about small business lending." — Omid [71:56]
Episode Takeaways
- Stablecoin yield restrictions are primarily a move to protect bank profits and market dominance, not consumer welfare or financial stability.
- Community banks are less threatened than big banks claim; the biggest risks to them come from big bank expansion, not stablecoins.
- The core innovation of crypto is not speed but trust minimization and openness; private permissioned efforts by banks miss the point.
- Education and interest in crypto among MBAs is at all-time highs—adoption is increasing structurally.
- Policy fights over stablecoin yields are likely to set precedent for future clashes over DeFi, developer rights, and self-custody.
For a deeper understanding, listen to Omid Malekan’s segment starting at [20:51], where he methodically unpacks each of the banks' arguments in the stablecoin yield debate, and to Bimnet’s tactical bitcoin and macro commentary at [05:42].