U.S. dollar-backed stablecoins could siphon as much as $500 billion out of the deposits of U.S. banks by the end of 2028, according to a fresh analysis from Standard Chartered, highlighting intensifying competitive pressure from digital assets on conventional banking business models.
The bank’s research, led by global head of digital assets research Geoff Kendrick, points to the inherent structural differences between stablecoins and traditional bank deposits as a source of disruption. Stablecoins operate outside the traditional banking infrastructure, instead settling transactions instantly and leveraging high-quality collateral such as U.S. Treasuries, making them increasingly attractive for payments and savings functions that once were the preserve of banks.
Standard Chartered’s analysis emphasises that regional U.S. banks face the most acute risk, given their heavy reliance on net interest margin income, the gap between what lenders earn on loans and what they pay on deposits. Loss of deposits to stablecoins could erode this core revenue stream, potentially weakening the profitability and funding stability of smaller banks in particular. The trend reflects broader shifts in how customers interact with financial services, with digital asset platforms presenting an evolving alternative to conventional deposit-taking and payment systems.
The U.S. has enacted federal legislation to provide a regulatory framework for stablecoins, a development expected to boost general use of digital tokens even as lawmakers and banking lobbyists dispute provisions on whether stablecoin issuers can pay interest. Banks argue that loopholes allowing third parties to offer yield on stablecoins could accelerate deposit migration and undermine banking sector stability. Crypto firms push back, saying restrictions on yield would be anti-competitive, underscoring deepening tensions between traditional financial institutions and digital asset innovators.
How banks adapt to this challenge, including whether they develop their own digital offerings or adjust business models to preserve core deposit bases, remains unresolved, leaving policymakers and industry leaders to grapple with the ramifications of integrating stablecoins into the broader financial ecosystem.
