U.S. dollar-pegged cryptocurrencies known as stablecoins could divert as much as $500 billion in deposits away from U.S. banks by the end of 2028, according to new estimates released by Standard Chartered on Tuesday. The findings may intensify the ongoing clash between traditional banks and crypto firms over legislation shaping the future of the digital asset industry.
Regional U.S. banks would be the most vulnerable to deposit outflows linked to stablecoin adoption, said Geoff Kendrick, global head of digital assets research at Standard Chartered. The analysis focused on banks’ net interest margin income, which measures the difference between interest earned on loans and interest paid to depositors.
According to Kendrick, U.S. banks face growing pressure as payment systems and core banking services increasingly shift toward stablecoins. He warned that this trend could challenge the traditional banking model if digital tokens become more widely used for everyday transactions.
Last year, U.S. President Donald Trump signed legislation establishing a federal regulatory framework for stablecoins. The move is widely expected to accelerate the adoption of dollar-backed tokens. Supporters argue that stablecoins enable near-instant payments, although they are still primarily used to trade in and out of other cryptocurrencies, such as bitcoin.
The legislation bars stablecoin issuers from paying interest directly on digital tokens. However, banks argue that it leaves a loophole allowing third parties, including crypto exchanges, to offer yield on stablecoins. They say this could create fresh competition for deposits, which remain the main funding source for most lenders.
Banking industry groups have warned that unless lawmakers address this issue, banks could face a significant loss of deposits, potentially posing risks to financial stability. Crypto firms have countered that restricting interest payments would be anti-competitive and could stifle innovation in the sector.
A Senate Banking Committee hearing to debate and vote on crypto legislation was postponed earlier this month, partly due to disagreements over how to handle banks’ concerns.
Kendrick noted that the scale of deposit losses will depend largely on how stablecoin issuers manage their reserves. If a significant portion of reserves is held within the U.S. banking system, the impact on deposits would be smaller. However, he pointed out that the two largest stablecoin issuers, Tether and Circle, currently hold most of their reserves in U.S. Treasuries, meaning limited funds are flowing back into banks.
