• Kansas City Fed President Jeff Schmid casts doubt on stablecoins' uniqueness compared to traditional payment apps like Venmo.
  • The remarks highlight ongoing Federal Reserve skepticism amid regulatory scrutiny of stablecoins' banking impacts.
  • Market implications focus on potential deposit flight and the need for robust reserve frameworks as stablecoin adoption grows.

A Skeptical View from the Fed

Kansas City Fed President Jeff Schmid stirred debate in financial circles with his recent characterization of stablecoins as potentially nothing more than "Venmo on steroids." Speaking on October 6, 2025, amid broader monetary policy discussions, Schmid's comment underscores persistent uncertainty within the Federal Reserve about whether these digital assets offer meaningful innovation beyond enhanced versions of centralized payment applications.

According to people familiar with the matter, Schmid's remarks reflect a cautious stance as regulators grapple with the rapid growth of stablecoins like USDT and USDC, which now facilitate billions in daily transactions. Unlike Venmo—a PayPal (PYPL)-owned app that processes instant U.S. dollar transfers through traditional banking ledgers—stablecoins operate on blockchains, enabling global, peer-to-peer settlements without intermediaries. This technical distinction, however, hasn't fully convinced some Fed officials of their transformative potential.

"It's hard to know if stablecoin is anything different from Venmo on steroids," Schmid said, echoing sentiments previously voiced by other Fed members. His comments come as the Fed intensifies research into stablecoins' effects on banking stability and monetary policy transmission. Efforts to reach Schmid's office for further clarification were unsuccessful, but sources indicate his view aligns with internal Fed analyses framing stablecoins as potential disruptors to traditional deposit-taking institutions.

Regulatory and Market Dynamics

Schmid's skepticism arrives amid heightened regulatory scrutiny. Congress has examined federal frameworks for payment stablecoins through hearings like "Navigating the Digital Payments Ecosystem," weighing proposals such as the GENIUS Act against central bank digital currency alternatives. Analysts note these proposals often fall short on critical issues like bankruptcy resolution and Fed access, leaving gaps that could exacerbate risks during market stress.

Market participants are watching closely. Stablecoins have expanded global U.S. dollar liquidity, functioning like modern "eurodollars" by enabling 24/7 offshore trades and decentralized finance settlements—capabilities far beyond Venmo's domestic scope. This growth poses tangible risks to banks, as rapid adoption could displace deposits without the full reserve-backing safeguards of traditional accounts. Recent trends show stablecoins gaining traction in crypto trading and business-to-business payments, with innovations like PayPal's PYUSD further blurring lines between fintech and crypto.

Implications and Outlook

The debate sparked by Schmid's remarks touches on core questions of trust and infrastructure. Crypto advocates argue blockchain transparency offers advantages over regulated apps, while critics warn of fragility, citing the 2022 TerraUSD collapse as a cautionary tale. In the short term, regulatory pushes for 100% reserves and bespoke resolution mechanisms aim to prevent runs, though legislative gaps persist.

Longer-term, stablecoins could reshape payments as "new eurodollars," but their success hinges on robust frameworks to mitigate fragility risks. Experts predict potential Fed intervention in crises, possibly through emergency lending facilities, and hybrid models that blend stablecoins with CBDCs. As one industry observer noted, "The real test will be whether these instruments can withstand stress without taxpayer backstops—something Venmo already navigates through its banking partnerships."

Clarification: An earlier version of this article misstated the timing of related comments from Minneapolis Fed President Neel Kashkari; his critiques of crypto as "useless" and stablecoins as inferior to Venmo date to the early 2020s, not specifically 2025.