Stablecoins could pose a significant challenge to the US banking system in the coming years, with up to $500 billion in deposits likely to leave traditional banks by the end of 2028, according to a new analysis from Standard Chartered.
Stablecoins could put pressure on bank revenues and deposits
The forecast, reported by Reuters and published on Tuesday, suggests that regional U.S. banks will likely be most vulnerable to deposit losses from the growing adoption of dollar-pegged digital tokens.
Geoff Kendrick, global head of digital assets research at Standard Chartered, said small and mid-sized lenders face greater exposure as stablecoins increasingly take on roles traditionally done by banks, including payments and other core financial services.
Standard Chartered’s analysis focused on net interest margin income — the gap between what lenders earn from loans and what they pay to depositors.
As deposits leave the banking system, this revenue stream could come under pressure, particularly for institutions that rely heavily on personal and corporate deposits as a source of funding.
Kendrick warned that U.S. banks face growing risks as payment networks and core banking activities are gradually migrating to stablecoin-based systems.
Banks and crypto companies clash
While the country’s stablecoin bill, the GENIUS Act, currently prohibits issuers from paying interest on tokens, banks are concerned that it will allow third parties, including cryptocurrency exchanges, to offer returns on stablecoin holdings.
In recent months, banking sector groups have argued that this “stablecoin gap” could intensify competition for deposits, potentially triggering large-scale capital outflows from banks and increasing broader risks to financial stability. They requested changes to the bill on this subject.
Crypto companies have opposed these claims, arguing that banning interest payments linked to stablecoins would limit competition and innovation in the financial sector, delaying the planned increase in another key piece of legislation for the crypto market.
Earlier this month, a Senate Banking Committee hearing to debate and vote on planned crypto market structure legislation was postponed, in part because lawmakers could not agree on how to address banks’ concerns about deposit flight.
Kendrick noted that the ultimate scale of deposit losses will depend in part on how stablecoin issuers manage their reserves. If issuers hold a substantial portion of their collateral assets in the American banking systemthe impact on deposits could be less severe.
The two largest stablecoin issuers in the crypto market, Tether (USDT) and Circle (USDC), hold most of their reserves in U.S. Treasuries rather than bank deposits, meaning that a small portion of the funds are recycled back into the banking system.
Featured image from OpenArt, chart from TradingView.com
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