Stablecoins Are a Bigger Threat to US Banks Than Regulators Admit: Standard Chartered

Roughly $500 billion worth of cash will shift from bank deposits into stablecoins by 2028, estimated Standard Chartered Global Head of Digital Assets Rearch Geoff Kendrick in a note shared with Decrypt.

It’s a more modest estimate than Kendrick offered up in October, when he wrote that stablecoins could lure $1 trillion away from banks.

The report comes as lawmakers in D.C. debate over the Digital Asset Market Clarity Act, or CLARITY Act, which would create a federal regulatory framework for digital assets and could include provisions limiting whether stablecoin holders can earn yield. If stablecoins are allowed to begin offering yield, then it could siphon a substantial amount of cash out of the traditional banking system.

Although progress on getting the bill passed has stalled, Kendrick still expects to see it headed for President Donald Trump’s desk for a signature by the end of Q1.

“If deposits decrease, NIM income—an important driver of bank earnings—will also decrease,” Kendrick wrote.

Net interest margin (or NIM) income represents the spread between what banks earn on loans, including mortgages and credit cards, and what they pay on deposits. The Standard Chartered analyst explained that using NIM as a total percentage of revenue allows for an apples-to-apples comparison with stablecoins.

“Deposits drive NIM, and they risk leaving banks as a result of stablecoin adoption,” he added. “We find that regional U.S. banks are more exposed on this measure than diversified banks and investment banks, which are least exposed.”

In a chart Kendrick compiled using Bloomberg data and the bank’s own research, he showed that regional banks like Huntington Bancshares, M&T Bank, Truist Financial, and Regions Financial are all predominantly reliant on NIM for more than 60% of their revenue.

Investment banks like Goldman Sachs and Morgan Stanley derive a much smaller percentage, less than 20%, of their revenue from net interest margin.

But that doesn’t mean stablecoins paying yield means the death of regional banks, Kendrick cautioned.

“If stablecoin issuers hold a large share of their deposits in the banking system where the stablecoins are issued, that should reduce net deposit flight from banks,” he added. “The idea is that if a deposit leaves a bank to go into a stablecoin, but the stablecoin issuer holds all of its reserves in bank deposits, there would be no net deposit reduction.”