Standard Chartered Sounds Alarm: Stablecoins Poised to Drain $500 Billion from US Banks

A groundbreaking new report from Standard Chartered warns that the surging popularity of stablecoins is set to unleash a profound structural challenge upon the traditional banking system. The financial giant projects that by the end of 2028, a staggering $500 billion in deposits could flee US banks, migrating directly into stablecoin holdings.

The Digital Tsunami: Blockchain’s Inevitable Impact on Finance

Geoffrey Kendrick, Standard Chartered’s Head of Global Digital Assets Research, articulated the impending shift with clarity: “As payments and core banking functions increasingly pivot towards blockchain-based alternatives, the risk profile for traditional institutions is becoming undeniably clear.” Kendrick points to the stalled “Clarity Act” in the U.S. Congress as a microcosm of the intense struggle between entrenched financial powers and the burgeoning digital asset ecosystem. “This issue has already pitted major banks against industry innovators like Coinbase,” he noted.

The regulatory quagmire highlights deep divisions. Coinbase notably withdrew its support for the proposed legislation, fearing the latest draft would stifle the primary profit incentives for stablecoin issuance. Conversely, traditional banking stalwarts are sounding alarms. The CEO of Bank of America, for instance, has cautioned that allowing stablecoins to pay interest could potentially siphon an astronomical $6 trillion in deposits from the conventional banking system.

Paradoxically, Standard Chartered suggests that this very policy tug-of-war in Washington D.C. could ultimately act as a catalyst, accelerating stablecoin adoption once regulatory clarity finally emerges.

The Profit Squeeze: How Stablecoins Threaten Bank Margins

To identify the US banks most vulnerable to this seismic shift, Standard Chartered rigorously analyzed the proportion of Net Interest Margin (NIM) revenue within their total earnings. Kendrick emphasized that stable, low-cost deposits form the bedrock of a bank’s ability to generate NIM. Should funds continue their exodus to stablecoins, this vital profit stream will inevitably suffer a direct hit.

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The analysis revealed a clear hierarchy of risk:

• Regional US Banks: Face the highest risk due to their profound reliance on deposits to underpin lending activities and interest income.
• Diversified Large Banks: Anticipate a moderate impact, buffered by their broader operational scope.
• Investment Banks and Brokerages: Stand relatively safer, given their comparatively lower dependence on traditional deposits.

A One-Way Street: The Structural Challenge of Stablecoin Reserves

The report further illuminates a critical structural factor that could exacerbate deposit flight. Standard Chartered highlights that the leading stablecoin issuers, Tether and Circle, hold only a minuscule fraction of their reserves as traditional “bank deposits.” The vast majority are held in highly liquid assets like U.S. Treasuries. This crucial distinction implies that even if funds move from banks into stablecoins, they are unlikely to “flow back” into the banking system via reserve holdings, creating a unidirectional outflow of liquidity.

Global Demand and the Trillion-Dollar Horizon

Standard Chartered’s estimations indicate that approximately two-thirds of current stablecoin demand originates from emerging markets, with the remaining third coming from mature economies such as the United States. This global demand structure forms the fundamental basis for the projected $500 billion outflow from developed economy bank deposits.

Despite the challenging outlook, Geoffrey Kendrick underscores that the impact will not be uniform across all banks. The resilience of individual institutions will hinge on their capacity to adapt their financing models or proactively embrace innovative financial infrastructures, such as the tokenization of Real World Assets (RWA).

Currently, the total supply of USD stablecoins stands at approximately $300 billion. Should Standard Chartered’s forecast materialize, the sheer influx of funds from traditional bank deposits alone could propel the USD stablecoin market to nearly $1 trillion by 2028, representing a staggering threefold increase.

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