Hi folks,
I'm Marc Palet, a fintech venture capitalist based in Singapore, and focused primarily on emerging market payments and digital assets.
I lead APAC investments at OMVC and also write angel checks. I've helped a number of early-stage founders in the space, so if you're building something and want to reach out, drop me a message via Linkedin or to [email protected] - I'd love to connect.
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-Marc
Last month, I wrote a piece arguing that stablecoins need banks to scale — and that banks, in turn, have something to gain from stablecoins.
The response was bigger than I expected.
A lot of people reached out. Especially founders building infrastructure to help banks allow their customers to access digital assets. That was cool to see.
But the piece also triggered a deeper debate around bank incentives and whether stablecoins actually make sense for banks. So I’ll cover this as today’s topic.
Banks are simple businesses. At their core, they borrow and lend.
They take deposits. They pay you close to nothing for them. Then lend multiples of that money out at higher rates. That spread, a.k.a. Net Interest Margin, is the engine of banking.
Deposits drive everything. That’s why banks fight so hard to keep deposits sticky. The less they pay for deposits, the higher the margin.
So if it's this good, why isn’t everyone in this game?
Because you can't just start a bank. You have to be let in.
The charter is the entry ticket. It buys you three things no competitor can replicate: access to the Fed's payment infrastructure, deposit insurance that backstops your funding, and an implicit understanding that if you get into serious trouble, the state will help you survive. In exchange, you hold reserves at the central bank, submit to examination, and operate within the political constraints the sovereign sets. It’s a political bargain.
That's why bank charters are scarce. In fact, scarcity is the point. If anyone could get a charter, competition would drive deposit rates up and lending rates down until the spread disappeared. The margin exists because entry is restricted. That restriction is maintained through lobbying, regulatory capture, and the steady work of organizations that make sure the barriers stay high and the incumbents stay protected.
Now enter stablecoins.
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