Banks warn stablecoins could drain deposits; regulators see limited impact so far

Banks have warned that stablecoins, particularly those offering yield, could pull deposits out of the banking system, but policy and finance experts and some regulators say there is little evidence of that happening so far. Standard Chartered estimated in a research note that stablecoin growth could drain bank deposits, saying "that US bank deposits will decrease by one-third of stablecoin market cap," with the market cap cited at $308.15 billion according to DeFiLlama.

The debate has intensified as US lawmakers weigh whether to prohibit interest on stablecoin holdings under a proposed version of the CLARITY Act, a bill reportedly delayed by protests from inside the crypto industry despite banking sector support. Aaron Klein, a senior fellow in Economic Studies at Brookings, told Cointelegraph that so far stablecoins have mainly been used for crypto-related activities and as a store of value in non-dollar countries, and that "you will find little evidence that stablecoins have drained bank deposits." A representative of the European Banking Authority said stablecoins in the EU are mainly treated as payment instruments and remain lightly used by consumers, adding "we do not see current currency substitution, capital flight or dollarisation risks." Both Klein and the EBA representative warned the situation could change if stablecoin use expands.

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