By Hannah Lang
Jan 27 (Reuters) – U.S. dollar-backed crypto tokens, known as stablecoins, could withdraw about $500 billion in deposits from U.S. banks by the end of 2028, Standard Chartered estimated on Tuesday – a new analysis that could intensify the fight between banks and crypto companies over legislation setting rules for the digital assets sector.
U.S. regional banks would be most exposed to a loss of deposits from stablecoins, said Geoff Kendrick, global head of digital assets research at Standard Chartered.
The analysis was based on lenders’ net interest margin income – the difference between what a bank earns on loans and what it pays on deposits.
“US banks… face a threat as payment networks and other core banking businesses shift to stablecoins,” Kendrick said in the research note.
Last year, US President Donald Trump signed into law a bill creating a federal regulatory framework for stablecoins, which is widely expected to lead to more widespread use of dollar-pegged tokens. Proponents claim that stablecoins can be used to send and receive payments instantly, although they are most often used for exchanging other crypto tokens, such as bitcoin.
That bill banned stablecoin issuers from paying interest on cryptocurrencies, but banks say it left open a loophole that would allow third parties — such as crypto exchanges — to pay a yield on the tokens, creating new competition for deposits.
Banking industry lobbyists have argued that unless Congress closes this loophole, banks will experience an exodus of deposits, the primary source of funding for most lenders, potentially threatening financial stability.
Crypto companies have pushed back, arguing that banning them from paying interest on stablecoins would be anti-competitive.
A hearing to debate and vote on crypto legislation in the Senate Banking Committee was postponed earlier this month, in part due to disagreement over how lawmakers should address banks’ concerns.
Kendrick said the total amount of bank deposits exposed to risk from stablecoin adoption depends on whether issuers hold their reserves in the banking system. If stablecoin issuers keep a large portion of their reserves in U.S. banks, that would reduce potential deposit flight, he wrote.
Yet the two largest issuers of stablecoins – Tether and Circle – hold most of their reserves in U.S. Treasuries, “so very few redeposits are taking place,” Kendrick said.
(Reporting by Hannah Lang in New York. Editing by Mark Potter)
