Stablecoins Hoist a $500B Threat to Your Bank Deposits

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The city of banks, those iron beasts with vault doors for hearts, feels a frost creeping from the edge of the digital dawn. Stablecoins-glimmering little promises-slither into the machines that hold the nation’s coin, and the people wonder who will wake when the power fails.

In this cold year, the ledger trembles: stablecoins have grown by roughly 40% in circulation, now exceeding 300 billion dollars. Not a meteor, not a rumor, but a number that weighs on the jawbone of every teller and every pensioner who keeps faith in a safe place for their savings.

Long-term Funding Concerns

A Bloomberg report, citing Geoff Kendrick, global head of crypto research at Standard Chartered, dares to forecast that stablecoins could drive out as much as $500 billion in deposits from lenders across industrialized nations by the end of 2028. In the United States, the loss could be as large as a third of the total stablecoin market capitalization-an arithmetic that makes even sturdy accounting wobble on its feet.

Kendrick believes the pace of growth will quicken after the Clarity Act becomes law, regulation parading through Congress like a stern foreman through a factory floor, silent yet inexorable.

“U.S. banks also face a threat as payment networks and other core banking activities shift to stablecoins,” he wrote.

The quarrel between the old guard and the new is fiercest over whether holders of stablecoins should earn yield-like rewards. Coinbase currently offers 3.5% on balances held in Circle’s USDC-a lure that bank lobbying groups argue could hasten deposit losses if allowed to prosper.

“The bank lobbying groups and bank associations are out there trying to ban their competition,” said Coinbase chief executive officer Brian Armstrong at Davos. “I have zero tolerance for that; I think it’s un-American, and it harms consumers.”

Despite the clash, Kendrick expects the broader crypto market structure bill to be approved by the end of the first quarter, as if the machine would stop grinding only to fetch its own furrow of doom.

Regional Lenders Identified as Most Vulnerable

To discern which institutions tremble most, the analyst measured net interest margin income as a share of total revenue-the clearest beacon of deposit flight, since NIM is the furnace that keeps a bank warm or cold. By this measure, regional American banks appear more exposed than diversified lenders and investment houses, which seem to wear armor of a different metal.

Among 19 banks and brokerages surveyed, Huntington Bancshares, M&T Bank, Truist Financial, and Citizens Financial Group were named as standing at the threshold of risk.

Local lenders, bound more tightly to traditional lending than their larger peers, feel the sting of outflows more keenly. Yet the mood of the market carries a glimmer: the KBW Regional Banking Index rose nearly 6% in January, while the broader index crept a little more than 1%.

In the short run, anticipated rate cuts could ease deposit costs, and government efforts to spur activity might shore up loan growth. Still, Kendrick sees the long arc as unavoidable-a door that will open, one way or another, with or without permission.

“An individual bank’s actual exposure to a stablecoin-driven reduction in NIM income will depend largely on its own response to the threat,” he said.

He also noted that Tether and Circle-those two titans of the stablecoin sea-hold only 0.02% and 14.5% of their reserves in bank deposits, and that “very little re-depositing is happening.”

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2026-02-02 02:54