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Zafar Naik
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Sohrab KhawasSohrab is a passionate cryptocurrency news writer with over five years of experience covering the industry. He keeps a keen interest in blockchain technology and its potential to revolutionize finance. Whether he's trading or writing, Sohrab always keeps his finger on the pulse of the crypto world, using his expertise to deliver informative and engaging articles that educate and inspire. When he's not analyzing the markets, Sohrab indulges in his hobbies of graphic design, minimal design or listening to his favorite hip-hop tunes.
- Feb 17, 2026 10:34 UTC
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Paxos Warns Banks Are Wrong About Stablecoins After GENIUS Act
Paxos says the GENIUS Act has flipped the stablecoin narrative for U.S. banks.
New federal stablecoin rules challenge long-held fears about deposits and regulation.
Banks that ignore regulated stablecoins may risk losing ground to faster-moving competitors.
Paxos, the regulated blockchain and tokenization platform, posted a direct message to banks today. The old stablecoin playbook no longer applies.
In a post shared on X, Paxos called out four common banking industry beliefs about stablecoins and explained why each one is now outdated. The trigger is the GENIUS Act, signed into law by President Trump in July 2025, which set clear federal rules for stablecoin issuance in the U.S.
“Stablecoins are already a multi-trillion-dollar market and banks that can accept them into their business stand to benefit greatly,” Paxos stated.
Stablecoins Are No Longer Unregulated
The first myth Paxos goes after is that stablecoins sit outside regulation. That is no longer true. The GENIUS Act requires 1:1 reserve backing with liquid assets like U.S. Treasuries and monthly public disclosures. Only approved issuers can operate in the U.S.
Outside the U.S., Singapore’s MAS framework and the EU’s MiCA rules have set similar standards. Paxos says it already meets these requirements and that the compliance setup banks once found missing is now in place.
Do Stablecoins Actually Threaten Bank Deposits?
Banks have long worried that stablecoins would pull deposits away and hurt lending. Paxos disagrees.
“Stablecoins serve as rails for payments, settlement and capital efficiency in ways that deposit accounts cannot,” the company stated.
Paxos added that banks can issue or custody stablecoins themselves, turning what they see as a threat into a new product line. The company compared the moment to when electronic payments first scared banks.
Stablecoins, they argue, will follow the same path.
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From Crypto Tool to Global Payments
Stablecoins started as a liquidity tool for crypto exchanges. That chapter is over. Paxos pointed out that global companies now use stablecoins to move millions of dollars in minutes for cross-border payments, on-chain capital markets, and tokenized asset settlement.
The company also noted that on-chain stablecoin transactions can be publicly audited in real time.
“Reserves held in short-term Treasuries are safer than many bank assets,” Paxos added.
What Happens to Banks That Wait?
Paxos closed with a warning.
“Banks that embrace them can unlock faster settlement, improved liquidity management and entirely new products for clients. Those that reject them will cede market share to fintechs, blockchain-native players and forward-thinking peers.”
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FAQs
Yes, the GENIUS Act requires 1:1 reserve backing, monthly disclosures, and approved issuers, making stablecoins fully regulated in the U.S.
It sets clear federal rules for issuance, ensuring transparency, reserve backing, and regulatory compliance, modernizing the stablecoin market.
Banks that delay adoption risk losing market share to fintechs, blockchain-native firms, and peers offering faster settlement and new products.
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