The demise of the banking system started.
This is a statement that is certainly going to generate some controversy. It is hard to see especially with the banking lobby gearing up to push Congress to amend the law passed by the signing of the GENIUS Act.
We have a situation where the banks are upset that their monopoly could be ending. The fear is that deposits will exit the banking system due to yields being offered on stablecoins. This will raise lending costs, according to the bankers, causing catastrophic harm to the United States economy.
Of course, we can presume the same conversations will take place everywhere stablecoins are being developed.
In this article we will look at what is taking place and how things are unfolding against the banks even as they appear to be winning.
The Death of the Banks: Crypto's Ultimate Outcome
The demise of the banks is nothing new. In fact, it something that accelerated over the last two decades.
When we look at the largest corporations by market cap, we see only 2 American banks in the top 30. They are:
- JPMorgan Chase (12)
- Bank of America (24)
There are two Chinese banks, showing the strength of that countries system.
One of the main problems for the banking system is the fact that we are in the technological age. If we look at the list linked above, we see the top 10 filled with technology companies. This is only going to continue as companies such as Palantir keep moving up the rankings.
The entire discussion comes down to services. What is being offered by competitive entities that pull share from the banking system.
One industry that completely switched was mortgage origination. This use to be the sole domain of the banks. With the introduction of companies such as Quicken Loans, things changed.
Here is a table according to Grok:
| Year | Non-Bank Share of Originations (%) | Notes on Fintech Contribution |
|---|---|---|
| 2015 | ~50% | Fintechs minimal (~2-3%); early growth with platforms like LendingTree. Non-banks rising post-Great Recession. |
| 2016 | 52% | Fintechs ~3-5%; Rocket Mortgage launches, boosting digital applications. |
| 2017 | 55% | Fintechs ~5%; Increased online submissions amid low rates. |
| 2018 | 58% | Fintechs ~6%; Non-banks gain from bank retreats; digital processes shorten application times by 20%. |
| 2019 | 60% | Fintechs ~8%; Quicken Loans (Rocket) becomes top lender; 15%+ of applications digital. |
| 2020 | 65% | Fintechs ~10%; Pandemic accelerates online apps; non-banks handle refinance surge. |
| 2021 | 64% | Fintechs ~12%; Peak low rates drive 70%+ refinance share; fintechs capture 20% faster processing. |
| 2022 | 72% (purchase); 62% (refinance) | Fintechs ~14%; High rates shift some share to banks, but non-banks lead volume. |
| 2023 | 63% (purchase); 67% (refinance) | Fintechs ~16%; Applications drop 33% overall; fintechs maintain edge in digital efficiency. |
| 2024 | ~62% (estimated) | Fintechs ~17%; Originations rise 13% YoY per MBA; non-banks consolidate amid exits. |
| 2025 | ~63% (projected through Q1) | Fintechs >17%; Rates stabilize ~6%; digital apps expected to hit 75% of total submissions. |
That is a lot of business that exited the banking sector and went elsewhere. We saw much of the same thing happening with automobile loans as they shifted to things such as Ford Motor Credit and GMAC.
With tokenization, things take another major turn. A digital wallet provides the services that cover 90% of the banking needs for most. When we think about it, the overwhelming majority only use a bank to send, receive and store money.
Digital wallets serve this purpose.
Stablecoins Change Everything
The recent stablecoin law has the banks worried. We did see some provisions that appear to hand the industry to the banks.
Non-financial companies are banned from becoming a stablecoin issuer unless they receive a waiver. Time will tell if these are approved.
That said, there is on platform that can go down this path: X. The exemption is only required by publicly traded companies. Private firms can all issue stablecoins. This means Elon Musk can get into the game with X, the mostly likely choice (although he could do it with any of his companies outside of Tesla).
It is true that deposits can be pulled from the banking sector. We saw this in the 1980s with the introduction of money market accounts. This would indeed put pressure on the banks, likely raising lending costs.
Taken in a vacuum, this might be a problem. However, why do we believe the banks will have a monopoly on lending? We are already seeing some significant headway being made in the decentralized finance (DeFi) world. As the value of some crypto increases, the ability to collateralize it moves in lockstep.
The point being is the entire system is ripe for disruption. Banks are trying to maintain their role as gatekeepers, ignoring the fact that, in many instances, they are not required. After all, much of what they do is application based. How important is the bank name at the top?
Crypto infrastructure is expanding. We are also seeing cross-chain protocols growing. This means interoperability, something the system is lacking. At the same time, people are becoming more comfortable with crypto, digital wallets, and DeFi applications.
Jamie Dimon is bringing JPMorgan into the crypto age by entering the stablecoin market. The problem is he has no idea why people would want this. Here is one of the brightest banking minds in the world and he is clueless as to the transformation that is taking place.
Talk about being in an echo chamber.
Here is where disruption takes place. Money is no longer financial, it is technological. Long gone are the days where physical cash dominates. Today, most of the transactions of the USD are digital, especially in the US. Most of the banknotes resides outside the country, used by people with less stable currencies.
Elon Musk. Mark Zuckerberg. Marc Benioff. Jack Dorsey.
These are some of the top tech minds. They are also potential competition for the banks. Money is now data and nothing exemplifies this more than crypto. We already see what stablecoins did for companies such as Tether and Circle. What happens when X pushes on to its platform similar to how PayPal brought out PYUSD?
The downfall of the banks is not going to happen immediately. For the next decade, we will see a hybrid system. One of the keys to technological disruption is the acceptance by humans. We tend to be averse to change. That said, with the rise of the agentic age, where AI takes over a vast percentage of services, the transition will accelerate.
As stated on a number of occasions, AI agents will not have bank accounts.
This is a problem for the traditional banking system, compounding the issues they are already facing from FinTech.