Stablecoin Growth Could Trigger $500B Deposit Outflow by 2028
A report from Standard Chartered issued Tuesday warns that stablecoins present a tangible risk to global bank deposits. Analyst Geoff Kendrick estimates that U.S. bank deposits could fall by one-third of the total stablecoin market capitalization, which currently stands at $301.4 billion for USD-pegged tokens. The bank projects that if the stablecoin market expands to a $2 trillion valuation by the end of 2028, approximately $500 billion in deposits could exit developed-market banks. The outflow from emerging-market banks could be even more severe, potentially reaching $1 trillion.
This analysis highlights the systemic risk posed by digital currencies that offer yield, a feature targeted by the proposed U.S. CLARITY Act. The report suggests that any delay in such regulation serves as a reminder of the threat stablecoins pose to traditional financial institutions. The bank maintains its expectation that the CLARITY Act will pass by the end of the first quarter of 2026.
US Regional Banks Face Greatest Profitability Risk
Standard Chartered's analysis identifies U.S. regional banks as the most vulnerable to capital outflows driven by stablecoin adoption. The key risk metric is net interest margin (NIM) income as a percentage of total revenue. Since deposits are the primary driver of NIM, their departure directly impacts bank profitability. The report specifically names Huntington Bancshares, M&T Bank, Truist Financial, and CFG Bank as the most exposed institutions. In contrast, larger diversified banks and investment banks, which have more varied revenue streams, are considered the least exposed to this specific risk.
Issuers' Reserve Policies Amplify Bank Run Risk
The threat of deposit drains is magnified by the reserve management practices of the largest stablecoin issuers. According to the report, if stablecoin issuers held their reserves as deposits within the banking system, there would be no net reduction in total bank deposits. However, data reveals this is not the case. Tether (USDT) and Circle (USDC), the two dominant stablecoins, hold just 0.02% and 14.5% of their respective reserves in bank deposits. This practice means capital that leaves a bank for a stablecoin does not get re-deposited, creating a net outflow from the banking system and increasing systemic risk.
