Stablecoins Could Endanger Bank Deposits, Standard Chartered Warns

Stablecoins pose a real risk to bank deposits, both globally and in the United States, according to a fresh assessment by Standard Chartered’s digital assets research team. The analysis comes as the US CLARITY Act, a bill targeting stablecoin yields, remains delayed—a sign that policymakers continue to scrutinize how stablecoins interact with traditional banking. The bank’s researchers estimate that US bank deposits could shrink by as much as a third of the current stablecoin market cap, a sector measured at roughly $301.4 billion in dollar-pegged coins, according to CoinGecko. Beyond the numbers, the report maps how regional banks could bear a larger share of the deposit outflow risk compared with more diversified or investment-focused institutions. The findings arrive as Coinbase withdraws support for the CLARITY Act and Circle’s CEO dismisses fears of bank runs as unfounded, underscoring a deeply polarized policy debate around stablecoins and banking stability.

Key takeaways

• Regional US banks face higher exposure to stablecoin-driven deposit shifts, with Huntington Bancshares, M&T Bank, Truist Financial and CFG Bank highlighted as most at risk compared with diversified banks or investment banks.
• NIM income, a core profitability metric, becomes a principal measure of risk: if deposits migrate to stablecoins and banks lose those funds, net interest margins can deteriorate for institutions with heavier retail deposit bases.
• The pressure on deposits hinges on where stablecoin issuers park their reserves; if holdings are concentrated in the issuing banks, outflows may be offset, but misalignment increases systemic deposit risk.
• Reserve composition matters: Tether’s USDt and Circle’s USDC reportedly hold only 0.02% and 14.5% of their reserves in bank deposits, suggesting limited re-depositing and weaker spillover effects on banks when stablecoins are used widely.
• Demand for stablecoins skews toward emerging markets, with roughly two-thirds of current demand coming from those regions; developed markets account for about one-third, implying uneven regional impact on bank deposits by 2028.
• With a projected $2 trillion market cap for stablecoins, the analysis projects about $500 billion in deposits could depart developed-market banks and roughly $1 trillion could leave emerging-market banks by end-2028.

Tickers mentioned: $USDT, $USDC

Sentiment: Neutral

Price impact: Neutral. The report frames deposit risk and regulatory dynamics rather than immediate price movements.

Trading idea (Not Financial Advice): Hold. Focus remains on risk assessment and regulatory trajectory rather than short-term trading signals.

Market context: The findings sit at the intersection of evolving stablecoin policy, bank funding dynamics, and regional disparities in demand. As regulators weigh how to regulate yields and reserve practices, the banking sector faces a potential reallocation of deposits should stablecoins broaden their footprint among consumers and institutions alike.

Why it matters

The Standard Chartered analysis reframes stablecoins as not merely a payments or yield phenomenon but a potential driver of bank deposit stability. If a significant portion of retail and wholesale deposits migrates into dollar-pegged digital assets, banks—particularly those with concentrated regional footprints—could see narrower net interest margins as the funding base contracts. The study emphasizes NIM income as the clearest window into this risk, since deposits are a key revenue engine for many banks. In practical terms, a regional lender with a higher reliance on deposits stands to experience more pronounced pressure on margins than a diversified or investment-focused institution.

The report also underscores a nuanced dynamic: the location of stablecoin reserves matters for the stability of the broader banking system. If stablecoin issuers keep reserves in banks within the same country or region where the stablecoins are issued, withdrawals might be offset by redeposits, potentially dampening systemic risk. Conversely, if reserves are held elsewhere or are insufficiently diversified, deposit runs could intensify stress in the banking sector. This distinction helps explain why the analysis points to a greater risk concentration among certain regional US banks and suggests that reserve management practices will be a focal point for both issuers and regulators.

Beyond domestic policy friction, the conversation touches on the real-world asset (RWA) frontier—tokenized assets that could amplify or complicate deposit dynamics as markets experiment with new forms of collateral and liquidity. While stablecoins are the current focal point, the broader implication is that the banking system could face deposit stability challenges from multiple digital-asset innovations, especially as mainstream adoption grows and policy frameworks evolve.

What to watch next

• Progress on the CLARITY Act—whether lawmakers advance the bill toward passage by the end of the first quarter of 2026.
• Reserve composition updates from the largest stablecoins, particularly how issuers balance fiat reserves across banking partners and custodians.
• Deposits flow data from regional banks and larger lenders to gauge early signs of stablecoin-driven outflows.
• Regulatory clarity on allowances for stablecoin yields and the impact of potential policy shifts on bank funding models.
• Continued discourse around tokenized real-world assets and their implications for liquidity and deposit stability.

Sources & verification

• Standard Chartered report detailing stablecoins’ impact on bank deposits and NIM as a risk measure.
• CoinGecko’s USD-stablecoin market-cap measurement referenced in the analysis.
• Statements and coverage addressing Coinbase’s stance on the CLARITY Act and public comments by Circle’s CEO on bank-run fears.
• Bank of America coverage discussing the potential $6 trillion in bank deposits at risk from stablecoin yields.

Stablecoins, deposits and regulatory risk for banks

Standard Chartered’s researchers map a pathway where stablecoins—cryptocurrencies pegged to the dollar—could reshape traditional deposit dynamics. The bank’s base-case projection centers on a broad, cross-border set of variables, including where issuers lodge their reserves, how domestic versus foreign demand evolves, and whether wholesale funding patterns shift in tandem with consumer adoption of stablecoins. The analysis starts from the premise that deposits are the bedrock of many banks’ profitability, and that stablecoin adoption can erode that bedrock through multi-channel deposit outflows. Given the current size of the US-dollar stablecoin market, the implications are not purely theoretical—they depend on policy choices and market behavior over the next few years.

One of the key levers identified is the location of issuers’ reserves. If the money that backs stablecoins remains predominantly in the issuing banks, a drawing down of deposits could be mitigated by a corresponding redeposit of funds into the same financial system, thus softening spillovers. In contrast, if reserves are dispersed or held in jurisdictions distant from the point of issuance, the risk of net deposit reduction rises for the issuing banks and the broader domestic system. The report notes that the reserve posture is not just a technical detail; it informs the probability and magnitude of potential bank runs tied to stablecoins.

On the reserve front, the analysis flags the reserve allocations of the two largest stablecoins: USDt (CRYPTO: USDT) and USDC (CRYPTO: USDC). The findings show that only a minimal portion of their reserves sits in bank deposits—0.02% for USDt and 14.5% for USDC—limiting the direct channel through which redeposits might offset outflows. This lowers the likelihood that simply moving funds into a stablecoin would automatically produce a corresponding, offsetting redeposit back into the same banking system. Still, the effect can vary depending on the issuer’s overall funding mix and the appetite of domestic users to convert stablecoins back into fiat in local banks.

The regional dimension is also central. The analysis argues that domestic demand for stablecoins tends to drain local bank deposits more aggressively than foreign demand, underscoring why regional lenders could bear a disproportionate burden. The report names a handful of regional US banks—Huntington Bancshares, M&T Bank, Truist Financial and CFG Bank—as being among the more exposed institutions under this framework. By contrast, larger, diversified banks and investment banks appear comparatively insulated, given broader funding bases and non-retail revenue streams. This geographic and business-model split helps explain the sector-wide caution around stablecoins and deposit stability in the near term.

Looking ahead, the team projects a bifurcated demand landscape. They estimate that roughly two-thirds of stablecoin demand today originates from emerging markets, with about one-third from developed markets. If demand proves persistent and stablecoins continue to scale, the resulting net outflows could become a material tail risk for certain bank segments. Under a scenario where stablecoins reach a $2 trillion market cap, the bank deposit implications become more pronounced: roughly $500 billion could depart developed-market banks by 2028, while about $1 trillion could exit emerging-market banks. These figures illustrate the scale of potential disruption even before policy actions or macroeconomic shifts are factored in.

Beyond pure market dynamics, Standard Chartered notes that the CLARITY Act’s ultimate fate will shape the regulatory backdrop against which all of this plays out. The bank still expects the bill to pass by the end of the first quarter of 2026, a timeline that would heighten the emphasis on how banks and issuers adapt their business models to changing rules around stablecoin yields and reserve practices. The analysts also remind readers that deposit risk is not unique to stablecoins; broader tokenization of real-world assets could introduce additional channels for risk transfer and liquidity fragmentation as the digital-asset ecosystem expands.

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