Stablecoins could pose a significant challenge to the US banking system over the next several years, with as much as $500 billion in deposits potentially moving out of traditional banks by the end of 2028, according to a new analysis from Standard Chartered.
Stablecoins Could Pressure Bank Earnings And DepositsGeoff Kendrick, Standard Chartered’s global head of digital assets research, said smaller and mid‑sized lenders face greater exposure as stablecoins increasingly take on roles traditionally handled by banks, including payments and other core financial services.
As deposits leave the banking system, that income stream could come under pressure, particularly for institutions that rely heavily on consumer and commercial deposits as a funding source.
Banks And Crypto Firms ClashWhile the country’s stablecoin bill, the GENIUS Act, presently prohibits issuers from paying interest on the tokens, banks are concerned that it would allow third parties, including cryptocurrency exchanges, to offer returns on stablecoin holdings.
Crypto companies have pushed back against those claims, arguing that prohibiting interest payments tied to stablecoins would limit competition and innovation in the financial sector, thereby delaying the anticipated markup of another key piece of legislation for the crypto market.
Earlier this month, a Senate Banking Committee hearing to debate and vote on the anticipated crypto market structure legislation was postponed, in part because lawmakers could not agree on how to address banks’ concerns over deposit flight.
The two biggest stablecoin issuers in the crypto market, Tether (USDT) and Circle (USDC), hold most of their reserves in US Treasuries rather than bank deposits, meaning little of the funds are recycled back into the banking system.
Featured image from OpenArt, chart from TradingView.com
