Standard Chartered estimated on Tuesday that stablecoins, which are U.S. dollar-backed cryptocurrency tokens, could withdraw about $500 billion in deposits from U.S. banks by the end of 2028.
This new analysis could escalate a battle between banks and cryptocurrency companies over legislation to set rules for the digital asset sector.
According to Geoff Kendrick, global head of digital assets research at Standard Chartered, regional U.S. banks would be particularly vulnerable to a loss in deposits as a result of stablecoins.
Lenders’ net interest margin income, or the difference between what a bank makes from loans and what it pays out on deposits, served as the basis for the analysis.
“U.S. banks … face a threat as payment networks and other core banking activities shift to stablecoins,” Kendrick stated in the research report.
A bill establishing a federal regulatory framework for stablecoins was signed into law by U.S. President Donald Trump last year, and it is generally anticipated that this will increase the use of the dollar-pegged tokens.
Although they are most frequently used for trading in and out of other cryptocurrency tokens, like Bitcoin, proponents claim that stablecoins can be used to send and receive payments instantaneously.
Banks claim that although the bill forbade stablecoin producers from paying interest on cryptocurrencies, it left open a loophole that would allow third parties, like cryptocurrency exchanges, to offer yield on tokens, thus increasing competition for deposits.
Banking lobbyists contend that if Congress doesn’t fix that loophole, deposits—the main source of funding for the majority of lenders—will leave banks, endangering financial stability.
Crypto firms have retaliated, claiming that it would be anti-competitive to prevent them from making interest payments on stablecoins.
Earlier this month, the Senate Banking Committee postponed a meeting to discuss and vote on crypto legislation, partly because of disagreements on how lawmakers should handle banks’ concerns.
According to Kendrick, whether or not issuers retain their reserves in the banking system will determine the total amount of bank deposits at risk from the adoption of stablecoins.
He claimed that there would be less chance of deposit flight if stablecoin issuers kept a sizable portion of their reserves in US banks.
However, the majority of the reserves of the two biggest stablecoin issuers, Tether and Circle, are kept in US Treasuries, “so very little re-depositing is happening,” according to Kendrick.
