It's wild that banks can tolerate money market funds but not stablecoins.

Perhaps because money market funds still lend in repo. Stablecoins make treasury collateral inert, AND lower interest rates by creating demand for bonds. That's a double whammy against banks, and liquidity.

Illiquidity, of course, being how banks die. Also how Bitcoin dips in fiat terms, but don't threaten me with sale prices...