Stablecoins Could Pull $500 Billion in Deposits From U.S. Banks by 2028: Standard Chartered

U.S. dollar-backed stablecoins could divert around $500 billion in deposits from U.S. banks by the end of 2028, according to a new analysis by Standard Chartered, a development that may intensify tensions between traditional banks and crypto companies over pending digital asset legislation.

The analysis, led by Geoff Kendrick, Global Head of Digital Assets Research at Standard Chartered, suggests that regional U.S. banks would be the most exposed to potential deposit outflows driven by growing stablecoin adoption.

Regional Banks Face Higher Exposure

The estimate is based on banks’ net interest margin income, which reflects the difference between interest earned on loans and interest paid on deposits. Kendrick warned that as payment systems and core banking functions increasingly migrate toward stablecoin-based networks, traditional lenders could face structural pressure.

“U.S. banks face a threat as payment networks and other core banking activities shift to stablecoins,” Kendrick noted in the research report.

Regulatory Framework Accelerating Adoption

The warning follows the passage of U.S. stablecoin legislation signed into law by President Donald Trump last year, which established a federal regulatory framework for dollar-pegged crypto tokens. The legislation is widely expected to encourage broader use of stablecoins, particularly for payments and settlement.

While stablecoins are commonly used to move funds in and out of other crypto assets such as bitcoin, supporters argue they also enable near-instant payments, challenging traditional banking rails.

However, the law prohibits stablecoin issuers from paying interest directly on tokens. Banks argue that it leaves a loophole allowing third parties, such as crypto exchanges, to offer yield on stablecoins, potentially creating direct competition for bank deposits.

Banks Warn of Financial Stability Risks

U.S. banking lobbyists have warned lawmakers that unless Congress closes this loophole, banks could face significant deposit outflows. Deposits remain the primary funding source for most lenders, and a large-scale shift toward stablecoins could pose risks to financial stability.

Crypto firms, however, have pushed back against these concerns, arguing that restrictions on interest payments would be anti-competitive and stifle innovation in digital payments.

Legislative Uncertainty Continues

Debate over how to balance these competing concerns has already delayed progress. A Senate Banking Committee hearing to debate and vote on crypto legislation was postponed earlier this month, partly due to disagreements over how lawmakers should address banks’ objections.

Stablecoin Reserves a Key Variable

According to Kendrick, the scale of deposit flight will depend heavily on how stablecoin issuers manage their reserves. If a significant portion of reserves were held within the U.S. banking system, the impact on deposits could be mitigated.

However, the two largest stablecoin issuers, Tether and Circle, currently hold most of their reserves in U.S. Treasuries, meaning “very little re-depositing is happening,” Kendrick said.