Stablecoins compete for deposits as U.S. mulls oversight

Key Points:

• Impact depends on stablecoin design, rulemaking, reserve custody, and interest permissions.
• Stablecoins could attract global cash to U.S. finance, or drain deposits.
• Deposit disintermediation moves funds from bank deposits to stablecoins or funding instruments.

A senior adviser to Donald Trump’s campaign argues regulated dollar stablecoins will pull global cash into U.S. finance. Banks and regulators counter that they could drain deposits from traditional banks. Which effect dominates depends on design and rulemaking.

In practice, the debate turns on deposit disintermediation: customers moving funds from bank deposits into stablecoins or instruments funding them. It also hinges on where issuers hold reserves and whether they may pay interest. Those choices determine if inflows boost bank balance sheets or bypass them into market funds and Treasuries. The direction is not uniform across institutions.

Two scenarios: non-interest vs interest stablecoins

Policy discussions separate two paths. Non-interest stablecoins under prudential oversight versus interest-bearing stablecoins that compete directly with deposits.

Proponents say regulated tokens could channel offshore dollars into U.S. assets and payments rails. “Drive global deposits into the U.S. banking system,” said Patrick Witt, crypto advisor to former President Trump.

According to Standard Chartered strategist Geoffrey Kendrick, up to $500 billion could leave U.S. bank deposits by end-2028, especially if issuers offer yields. The bank notes that reserves backing stablecoins often sit in cash equivalents and short-term government paper, so system inflows need not equal deposits on bank balance sheets.

Said Brian Moynihan, CEO of Bank of America, if issuers can pay interest, $5–$6 trillion could shift out of traditional deposit liabilities. He added the bank would likely launch its own dollar-backed stablecoin once permitted by law.

According to Coinbase, the “deposit erosion” narrative overstates domestic shifts because most stablecoin usage is global or cross-border. That view implies U.S. banks may see less direct outflow than headlines suggest.

Who’s most exposed: community and regional banks

According to the Independent Community Bankers of America, community and regional banks are most exposed because funding relies on core deposits and net interest margins that could compress if customers migrate. The group urges regulatory parity so nonbank issuers do not benefit from lighter rules while drawing deposits away from local lenders.

Monetary policymakers also flag macro risks. Stablecoins could “siphon money away from the banking system,” said Andrew Bailey, Governor of the Bank of England.

As reported by CryptoSlate, lawmakers are debating proposals such as the GENIUS Act that would set prudential oversight and regulatory parity for issuers. Outcomes will depend on reserve custody, supervisory perimeter, and interest permissions.

Taken together, non-interest models might modestly reshape funding, while interest-bearing tokens could materially disintermediate deposits. The net effect on U.S. banks versus the broader dollar system remains uncertain and will likely vary by institution.