- Standard Chartered estimates stablecoins could pull about $500 billion in deposits from US banks by end-2028, with regional lenders most exposed; risk tied to net interest margins and payment shifts.
- A law last year bars issuers from paying interest but may allow third-party yields; banks warn of deposit pressure and a Senate hearing was postponed, while Tether and Circle hold reserves mainly in Treasuries.
A new estimate from Standard Chartered suggests US banks could see a meaningful shift in deposits as dollar-linked crypto tokens gain wider use. The bank said on Tuesday that stablecoins may draw about $500 billion in deposits away from the U.S. banking system by the end of 2028, a projection that adds urgency to an ongoing policy debate over how the sector should be regulated.
Standard Chartered’s estimate and why regional lenders are singled out
Standard Chartered’s analysis linked the potential deposit decline to how stablecoins may change payment behavior and related services. Geoff Kendrick, the firm’s global head of digital assets research, said regional US banks would face the greatest exposure if stablecoins increasingly replace traditional payment rails and other core banking functions.
The research model was built around lenders’ net interest margin income. That measure captures the spread between what a bank earns by making loans and what it pays out to depositors. In Kendrick’s view, if stablecoin adoption leads to deposit outflows, it could pressure that income stream, since deposits are a key input to bank funding and profitability. In the research note, he warned that US banks face a risk as payment networks and other foundational banking activities migrate toward stablecoin-based alternatives.
How stablecoin regulation is shaping the debate for US banks
The estimate lands amid a contested legislative environment in Washington. The source material notes that U.S. President Donald Trump last year signed a bill into law that created a federal regulatory framework for stablecoins. The framework is widely expected to increase general usage of dollar-pegged tokens.
Supporters argue that stablecoins can enable instant payment sending and receiving. However, the source also points out that these tokens are most often used to move in and out of other cryptoassets, including bitcoin. That mix of payment-focused arguments and trading-driven usage has become part of the broader push and pull between the banking industry and crypto firms over what stablecoin rules should allow.
Under the law described, stablecoin issuers are barred from paying interest on cryptocurrencies. Banks, however, have argued the bill leaves a gap: third parties, including crypto exchanges, could potentially offer yield on tokens. In the banking industry’s view, that would increase competitive pressure for deposits and could accelerate the movement of funds away from traditional accounts. Banking lobbyists have said that unless Congress closes this opening, US banks could face a withdrawal wave in deposits, which they describe as the main funding source for most lenders. They have also warned that such an outcome could pose financial stability concerns.
Crypto companies have rejected that framing. The source states that they have argued restrictions preventing them from paying interest on stablecoins would be anti-competitive. The clash has shown up in the legislative process. A Senate Banking Committee hearing intended to debate and vote on crypto legislation was postponed earlier this month, and the postponement was attributed in part to disagreement about how lawmakers should respond to banks’ concerns.
Where stablecoin reserves sit and what it means for deposit flight
Kendrick’s note also highlighted an important condition that could change the scale of deposit movement away from US banks. He said the overall amount of deposits at risk depends on where stablecoin issuers keep the reserves that back their tokens. If issuers hold a large portion of those reserves inside the U.S. banking system, the deposit loss implied by stablecoin adoption would be smaller because more funds would remain within banks in another form.
Kendrick indicated that, at least for the biggest issuers, that offset appears limited. The two largest stablecoin providers, Tether and Circle, were described as holding most of their reserves in U.S. Treasuries. Because of that, Kendrick said “very little re-depositing is happening,” suggesting that the backing assets for stablecoins are not flowing back into bank deposits in a way that would reduce pressure on US banks.
Conclusion
Standard Chartered’s Tuesday estimate puts a number on a concern that US banks and policymakers have been debating: stablecoins could redirect roughly $500 billion in deposits by the end of 2028, with regional banks flagged as the most exposed. The dispute now centers on how stablecoin-related rules handle interest-like incentives and whether lawmakers will address what banks describe as a loophole for third parties. Kendrick’s assessment also points to reserve management, noting that major issuers such as Tether and Circle keep most reserves in U.S. Treasuries, limiting the extent to which stablecoin growth would recycle funds back into bank deposits.
Disclaimer
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