Stablecoins Could Drain $500B From U.S. Banks, Standard Chartered Warns

Standard Chartered says the rise of stablecoins could pull as much as US$500 billion (AU$765 billion) in deposits out of US and other developed-market banks by the end of 2028, tightening a key source of cheap funding for lenders. 

The warning comes as dollar-tracking tokens continue to grow and lawmakers move closer to a dedicated US legal framework for digital assets.

The bank estimates that, over time, about one-third of total stablecoin market value will come directly at the expense of bank deposits. 

Related: Saylor Warns ‘Ambitious Opportunists’ Are Bitcoin’s Biggest Risk, Sparking Ossification Debate

Stablecoins Pose a Risk to Bank Deposits

So the core concern is that money now sitting in checking and savings accounts could migrate to tokenised dollars used for payments, trading and yield. 

As many know by now, stablecoins support basic banking-like functions as they move across payment networks, settle instantly, and in some cases pay rewards. Coinbase, for example, offers 3.5% on USDC balances (subject to market conditions, of course). 

Bank lobbies argue that letting crypto firms pay these rewards will speed up deposit flight. Coinbase’s CEO sums it up pretty well at the World Economic Forum in Davos last week:

The bank lobbying groups and bank associations are out there trying to ban their competition. I have zero tolerance for that, I think it’s un-American and it harms consumers.

Coinbase’s CEO Brian Armstrong.

Even so, Standard Chartered expects the broader digital-asset market-structure bill to pass by the end of the first quarter. The bank frames the main risk through net interest margin, the spread between what banks earn on loans and pay on deposits. 

Because deposits drive this income, lenders most reliant on traditional lending (especially regional US banks) are seen as more exposed than large diversified or investment banks.

Interestingly, Kendrick notes that stablecoin issuers themselves keep limited reserves in banks. Tether holds about 0.02% of backing assets as deposits, and Circle 14.5%. That suggests little of the money leaving banks for stablecoins is cycling straight back into the system —and how much revenue banks ultimately lose will depend on how each responds to the shift.

The stablecoin market has already expanded roughly 40% in the past year to just over US$300 billion (AU$459 billion), based on DeFi Llama data, and Standard Chartered expects that growth to accelerate once the Clarity Act, a bill to regulate the sector, is approved in Congress.

Read more: Saylor Warns ‘Ambitious Opportunists’ Are Bitcoin’s Biggest Risk, Sparking Ossification Debate

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