The banking sector’s exposure to stablecoins remains modest for now, but analysts say the landscape could tilt as the sector of stablecoins and tokenized real-world assets (RWAs) swells in market size. While adoption is still evolving, the on-chain payments and cross-border use cases are broadening, potentially reshaping how traditional banks compete with a new class of digital assets.

According to Abhi Srivastava, associate vice president of Moody’s Investors Service Digital Economy Group, the stablecoin market capitalization exceeded $300 billion by the end of last year. Cointelegraph’s coverage highlights that figure as a marker of rapid growth, even as everyday usage lags behind headline numbers. (Source: Cointelegraph)

Srivastava noted that the role of stablecoins in payments, cross-border commerce, and on-chain finance is expanding, even as today’s U.S. payment rails remain fast, low-cost, and trusted. He argues that near-term disruption risk to banks appears limited, particularly given policy constraints that currently bar yield-bearing stablecoins from paying yields—meaning they are unlikely to replace traditional deposits domestically in the near term.

Nonetheless, the report suggests that sustained growth in stablecoins and tokenized RWAs could exert pressure on banks over time, potentially driving deposit outflows and constraining lending capacity as more financial assets migrate onto the blockchain or into tokenized forms.

The policy debate around stablecoins has become a focal point for crypto executives and bankers alike, especially as concerns grow that yield-bearing stablecoins could erode traditional banking market share. This tension is playing out in broader regulatory discussions in Washington, where the CLARITY Act—officially the Digital Asset Market Clarity Act of 2025—seeks to deliver a formal taxonomy and regulatory oversight for crypto markets. Source: Cointelegraph.

CLARITY Act stalled, as banks push back on yield-bearing stablecoins

The CLARITY Act aims to establish a comprehensive framework for digital assets, including asset taxonomy and regulatory jurisdiction. It has stalled in Congress after a coalition of crypto companies, led by Coinbase, publicly opposed earlier drafts, citing concerns over open-source software protections and a prohibition on yield-bearing stablecoins. The clash underscores a broader negotiation between the crypto industry and the banking lobby over how far regulators should go in defining and controlling digital-asset activities.

Lawmakers and the White House have pursued negotiations to bridge the gap, but concrete compromises remain elusive. Earlier this month, North Carolina Senator Thom Tillis signaled plans to release an updated draft proposal that could address concerns from both sides; Politico reports the plan exists, though no public draft has been released at this time. Source: Politico.

Analysts warn that a failure to pass a clear regulatory framework could invite renewed or stricter regulatory crackdowns on the crypto sector in the years ahead. With the CLARITY Act at a critical juncture, market participants are watching not only its fate but also how lawmakers weigh stability, innovation, and consumer protection in a rapidly evolving ecosystem. For some observers, the risk is not only about a single bill failing to pass but about the signaling effect of regulatory gridlock on market development and institutional participation.

What to watch next for stablecoins and market structure

As the debate progresses, investors and builders should monitor how stablecoins evolve in payments and cross-border use, and how tokenized RWAs intersect with traditional banking services. The outcome of the CLARITY Act negotiations, along with any new proposals from lawmakers such as Tillis, will influence not just compliance requirements but the pace at which banks and fintechs collaborate or compete with on-chain financial instruments. The broader question remains: will a clear regulatory framework unlock wider institutional adoption of stablecoins, or will it slow the pace of innovation through tighter restrictions?

Readers should stay attuned to updates from Congress and major industry voices, as the balance between fostering innovation and ensuring financial stability will shape the trajectory of stablecoins, RWAs, and the crypto market’s interaction with traditional banking in 2025 and beyond.

What remains uncertain is how quickly a consensus will emerge on yield-bearing stablecoins and related products, and how any new framework will translate into practical rules for exchanges, issuers, and users. The coming weeks could offer critical signals about the sector’s path and the readiness of policymakers to align on a shared approach to digital assets.

A roughly $292 million exploit over the weekend has rattled the crypto industry, exposing vulnerabilities in decentralized finance (DeFi) infrastructure and raising concerns about knock-on effects across lending protocols.

While investigations are still ongoing, early analysis suggests the attack centered on Kelp’s rsETH token — a yield-bearing version of ether (ETH) — and the mechanism used to move assets between blockchains.

The attacker appears to have manipulated that system to create large amounts of tokens without proper backing, then quickly used them as collateral to borrow and drain real assets from lending markets, mostly from Aave AAVE$89.33, the largest decentralized crypto lender.

The incident is the latest blow to DeFi, happening only a couple weeks after the $285 million exploit of Solana-based protocol Drift, further denting investor trust in the nearly $90 billion crypto sector.

How the attack worked

At a high level, the exploit targeted a LayerZero bridge component — a piece of infrastructure that enables assets to move across different blockchains, Charles Guillemet, CTO of hardware wallet maker Ledger, told CoinDesk in a note.

Bridges typically work by locking assets on one chain and minting equivalent tokens on another. That process depends on a trusted entity — often called an oracle or validator — to confirm deposits.

In this case, Kelp effectively acted as that verifier. According to Guillemet, the system relied on a single-signer setup, meaning just one entity could approve any transactions.

“It seems the attacker was able to sign a message … allowing him to mint large amount of rsETH,” he said. He added that it remains unclear how that access was obtained.

Michael Egorov, founder of Curve Finance, pointed to the same weakness in the system’s configuration.

“Things can happen when you trust one single party — whoever that would be.”

That setup allowed the attacker to effectively create unbacked tokens, even though no corresponding assets were locked on the source chain.

Once minted, the tokens were quickly deployed. The attacker “immediately deposited them in lending protocols mostly Aave to borrow real ETH against,” Guillemet explained.

That maneuver shifted the problem from a single exploit into a broader market issue. DeFi lending platforms are now left holding collateral that may be difficult to unwind, while valuable and liquid assets are already drained.

“Aave was left with rsETH which cannot be really sold and maxborrowed [sic] ETH, so no one can withdraw ETH,” Curve’s Egorov said.

As a result, Aave and other lending protocols may be sitting on hundreds of millions of dollars in questionable collateral and bad debt, he warned, raising concerns of a potential “bank run” dynamic as users rush to withdraw funds.

Aave saw about a $6 billion drop in assets on the protocol as users yanked their assets following the incident. The token associated with the protocol was down about 15% over the past 24 hours’ trading.

What we still don’t know

Key questions remain around how the validator was compromised. The system relied on LayerZero’s official node, raising uncertainty over whether it was hacked, misconfigured or misled.

“Was it hacked? Was it fooled? We don’t know,” Egorov said.

The attacker’s identity is also unknown, though Guillemet said the scale of the attack suggests a sophisticated actor.

“Clearly not some script kiddies,” he said.

Big blow for trust in DeFi

Beyond the immediate losses, the exploit the episode serves as another reminder that as DeFi grows more interconnected, failures in one layer can quickly cascade across the system.

Egorov argued that non-isolated lending models, where assets share risk across pools, amplify the impact of such events.

He also pointed to shortcomings in how new assets are onboarded to lending platforms, saying configurations like Kelp’s 1-of-1 verifier setup should have been flagged earlier.

However, Egorov said there’s a silver lining. “Crypto is a harsh environment which no bank would have survived — yet we are working with that,” he said. “I think DeFi will learn from this incident and become stronger than before.”

Still, even as incidents like this lead to protocol upgrades and redesigns, they also chip away investor confidence in the broader DeFi sector.

“All in all, the trust into DeFi protocols is eroded by this kind of event,” Guillemet said.

“And 2026 will most likely be the worst year in terms of hacks, again,” he added.

Read more: ‘DeFi is dead’: crypto community scrambles after this year’s biggest hack exposes contagion risks

The impact of stablecoins on the banking sector appears “limited” at the current phase of the adoption cycle, but banks could face increasing competition and an erosion of market share as the stablecoin sector and tokenized real-world assets (RWAs) grow in market capitalization. 

“So far, the use of stablecoins remains limited, but their market capitalization exceeded $300 billion at the end of last year,” Abhi Srivastava, associate vice president of Moody’s Investors Service Digital Economy Group, told Cointelegraph.

The role of stablecoins in payments, cross-border commerce and onchain finance is “expanding,” despite their currently limited role, Srivastava said, adding that existing payment systems in the US are already “fast, low-cost and trusted.” He said:

“For the banking sector, at this stage, disruption risk appears limited. In the near term, US rules that prohibit stablecoins from paying yield mean they are unlikely to replace traditional deposits at scale domestically.”

However, over time, growing adoption of stablecoins and tokenized RWAs, traditional or physical financial assets represented on a blockchain by a token, could place “pressure” on the banking sector, leading to deposit outflows and reduced lending capacity, he said.

Stablecoin regulatory policy has become a hot-button issue among crypto industry executives and those in the banking sector, with fears that yield-bearing stablecoins could erode banking market share proving to be a stumbling block for the CLARITY crypto market structure bill in Congress. 

Related: Stablecoins behave like FX markets as liquidity splits: Eco CEO

CLARITY Act stalled, as banks fight yield-bearing stablecoins

The Digital Asset Market Clarity Act of 2025, also known as the CLARITY Act, is a comprehensive crypto market regulatory framework that establishes an asset taxonomy, regulatory jurisdiction and oversight over the crypto markets.

It is now stalled in Congress after a group of crypto industry companies, led by cryptocurrency exchange Coinbase, publicly stated opposition to earlier drafts of the bill.

A lack of legal protections for open-source software developers and a prohibition on yield-bearing stablecoins were among some of the most contentious issues cited by crypto industry opponents of the legislation.

Several attempts have been made by US lawmakers and the White House to negotiate a bill acceptable to both the crypto industry and the bank lobby.

Earlier this month, North Carolina Senator Thom Tillis said he plans to release an updated draft bill proposal that would be acceptable to both sides; however, the bill has reportedly received pushback, according to Politico, and has yet to be publicly released. 

However, other crypto industry executives and market analysts have warned that if the CLARITY Act fails to pass, it could open the crypto industry up to future regulatory crackdowns by hostile lawmakers and officials.

Magazine: Stablecoins will see explosive growth in 2025 as world embraces asset class