Key Points
- Stablecoins could pull $500 billion in deposits out of U.S. banks by the end of 2028, according to Standard Chartered.
- Regional banks would be the most exposed to this “deposit flight.”
- The issue stems from a loophole in a new stablecoin regulation bill that allows third parties to pay interest on the tokens.
- Banking lobbyists are pushing to close the loophole, while crypto companies say it would be anti-competitive.
Stablecoins, the dollar-backed crypto tokens that are at the heart of the digital asset world, could pull a staggering $500 billion in deposits out of U.S. banks by the end of 2028. That’s the warning from a new report by Standard Chartered, and it’s likely to add even more fuel to the fire in the ongoing fight between banks and crypto companies in Washington.
The analysis, which is based on the difference between what banks earn on loans and what they pay out on deposits, found that regional U.S. banks would be the hardest hit.
“U.S. banks… face a threat as payment networks and other core banking activities shift to stablecoins,” the report said.
The issue has come to a head after President Trump signed a bill last year that created a federal regulatory framework for stablecoins. The bill was supposed to bring more clarity to the market, but it left open a major loophole. It prohibited stablecoin issuers from paying interest, but it didn’t stop third parties, like crypto exchanges, from doing so.
Banking lobbyists are now in a panic. They are warning that this loophole will lead to a massive “exodus of deposits” as customers pull their money out of traditional bank accounts in search of higher yields on stablecoins. They say this could even threaten the stability of the entire financial system.
Crypto companies, for their part, argue that any attempt to close this loophole would be anti-competitive.
The disagreement has already caused a delay in further crypto legislation, and this new report from a major global bank is only going to intensify the debate. For now, it seems the battle for the future of money is just getting started.
