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Are Stablecoins Quietly Draining Banks? Standard Chartered Thinks So

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For a long time, financial institution deposits have been one of many quiet foundations of the monetary system, supplying lenders with the low-cost funding wanted to increase credit score and help financial progress.

Standard Chartered believes the danger of stablecoin slowly pulling cash out of conventional accounts is actual, even whether it is unfolding steadily.

In a current evaluation cited by Bloomberg, the financial institution warned that as stablecoins proceed to realize traction, as a lot as $500 billion in deposits may exit banks in developed markets by the top of 2028.

Stablecoins Test Traditional Banking as Adoption Accelerates

Geoff Kendrick, Standard Chartered’s international head of digital belongings analysis, stated the rising function of dollar-pegged tokens threatens to redirect funds into the digital asset ecosystem, significantly if upcoming U.S. legislation provides clearer regulatory footing.

The numbers behind the priority are already taking form. Stablecoin provide has climbed greater than 40% over the previous 12 months to simply over $300 billion, according to DefiLlama information.

Source: DefiLlama

Standard Chartered estimates that U.S. financial institution deposits may fall by roughly one-third of whole stablecoin market capitalization, with progress anticipated to speed up if Congress passes the proposed CLARITY Act.

The situation goes past funds alone. Kendrick famous that stablecoins are more and more touching core banking features, from transaction settlement to liquidity administration.

At the identical time, a central level of rigidity between banks and crypto platforms is whether or not shoppers ought to be allowed to earn rewards on stablecoin balances.

Coinbase at present presents about 3.5% in rewards on holdings of Circle’s USDC, a observe banking foyer teams argue may encourage deposit flight by making crypto balances extra enticing than conventional accounts.

Coinbase CEO Brian Armstrong has publicly pushed again on that argument, saying banks are trying to make use of regulation to dam competitors reasonably than shield shoppers.

Standard Chartered Points to Deposit Sensitivity at Regional Lenders

Standard Chartered’s evaluation centered on web curiosity margin revenue as a share of whole income, a metric intently tied to deposits. On that foundation, regional U.S. banks seem extra uncovered than bigger, diversified establishments.

Among the 19 banks and brokerages reviewed, Huntington Bancshares, M&T Bank, Truist Financial, and Citizens Financial Group have been recognized as probably the most susceptible.

Regional lenders rely extra closely on deposits to fund loans, that means even modest outflows may have an outsized affect.

For now, markets recommend the risk shouldn’t be speedy. U.S. financial institution deposits have rebounded after sharp declines in 2022 and early 2023, reaching a report $18.72 trillion in December 2025.

Core deposits grew by about 4% in 2025, up from 1.5% the 12 months earlier than, supported by Federal Reserve fee cuts and a slowdown in quantitative tightening.

Source: stlouisfed

Bank shares have additionally held up, with the KBW Regional Banking Index rising practically 6% in January, in contrast with simply over 1% for bigger banks.

Treasury-Backed Stablecoins Add New Twist to Deposit Debate

Still, Standard Chartered’s international head of digital belongings analysis, Geoff Kendrick, argues that the longer-term shift is troublesome to disregard. If stablecoin market capitalization reaches $2 trillion, he estimates deposit losses may method $500 billion.

He additionally identified that reserve practices restrict any recycling of funds again into the banking system.

Tether and Circle, the 2 dominant issuers, maintain simply 0.02% and 14.5% of their reserves in financial institution deposits, that means most backing belongings sit in Treasury payments reasonably than conventional accounts.

Not everybody agrees that stablecoins pose a destabilizing risk. In a current Bloomberg opinion piece, historians Niall Ferguson and Manny Rincon-Cruz argued that fears of deposit flight are overstated.

Since USDC launched in 2018, U.S. financial institution deposits have elevated by greater than $6 trillion, whereas stablecoins have grown by about $280 billion.

The publish Are Stablecoins Quietly Draining Banks? Standard Chartered Thinks So appeared first on Cryptonews.

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