Are stablecoins coming for your deposits?

• Key insight: Stablecoins still have the potential to usurp bank deposits, but if crypto companies hold their reserves at banks that could likely keep those funds within at least the largest firms.
• Expert Quote: "If you put money in a stablecoin, then the firm that is providing the stablecoin will have to put it in a safe asset [like] a bank deposit…but you could imagine that stablecoin reserves will be invested directly in treasuries, for example, and then it doesn't necessarily have to go through the banking system." — Itay Goldstein, a finance professor at the Wharton School of the University of Pennsylvania.
• Forward look: For now, broader consumer adoption of the technology seems more likely in cross-border payments.

Stablecoins have yet to gain broad adoption as an everyday payment method. But as interest in the market grows and the rules of the road become more clear, there are distinct areas where stablecoins could disrupt banking.

After the passage of the GENIUS stablecoin law last year, regulatory agencies have been promulgating dozens of rules to implement the law. The latest such rule came from the Treasury Department earlier this week when the agency issued a proposal that would effectively bar U.S. entities from dealing in foreign-issued stablecoins for fear that they would not comply with U.S. anti-money laundering laws.  

But much of the banking industry's efforts with respect to stablecoins in 2026 has been to stop issuers or crypto exchanges from offering yield on stablecoin holdings — a feature that they say would look and act a little too much like highly regulated core deposits that are the lifeblood of the banking system.  

Banks' preferred legislative language barring such a rewards regime for stablecoins has largely stalled in Congress, however, as has the crypto industry's efforts to force through a bill without such protections. In the absence of further legislation, experts have questioned whether stablecoins will be able to compete with banks under the existing legal framework. 

Some experts say stablecoins could compete directly with bank deposits and payments, but their reserves will in many cases remain within the banking system. 

"If you put money in a stablecoin, then the firm that is providing the stablecoin will have to put it in a safe asset [like] a bank deposit," said Itay Goldstein, a finance professor at the Wharton School of the University of Pennsylvania. "In that case, it will stay in the banking system, but you could imagine that stablecoin reserves will be invested directly in treasuries, for example, and then it doesn't necessarily have to go through the banking system. So certainly there is a concern.

"The banking system is calling that disintermediation, where essentially you're taking the intermediary — the bank — out of the loop, and there will be less money moving through the banking system," Goldstein continued. 

The Trump administration's embrace of the cryptocurrency industry and the issuance of a number of bank regulations implementing the GENIUS Act passed last year have raised concerns in the banking industry that stablecoins could drain their core deposits, the main source of funding for bank loans.

Whether that happens depends on how widespread public adoption of the technology ultimately is. Treasury Secretary Scott Bessent recently estimated that dollar-linked stablecoins could reach $2 trillion in market capitalization in the next few years.

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But the banks that ultimately end up holding those reserves are likely to be the real winners in the stablecoin dash. Todd Phillips, a director at Klaros Group and former FDIC official, said large-scale migration into stablecoins could be consequential for community banks because the companies issuing the tokens are more likely to place their reserves at big banks.

"My perspective is that stablecoins could certainly take deposits out of, for example, community banks," Phillips said. "You're not going to have a giant stablecoin issuer like Circle putting reserves into community banks; they're going to use J.P. Morgan Chase or a much larger company."

The mechanics of the Treasury market could reinforce that concentration, he said. 

"To the extent that they are buying Treasuries from the primary dealers, the primary dealers have bank accounts with the giant banks," Phillips continued. 

That means stablecoin growth doesn't have to draw down total deposits in the banking system to have a seismic effect on the industry. Deposits could move from smaller banks toward larger institutions as stablecoin issuers establish relationships with the banks best positioned to handle their reserves.

Where'd the dough go?

Dave Scola, chief product officer and U.S. chief executive at payments technology company Form3, said the aggregate effect depends on where the collateral backing stablecoins ends up.

"If it's a large institution and they are themselves an issuer, it's typically shifting the liability from one balance sheet to another, right?" Scola said. "It effectively moves from a straightforward fiat deposit to a deposit that's effectively collateralizing a stablecoin, and whether it's a bank deposit or whether it's backing a stablecoin issuance, the bank can still use it in the same way on the asset side of the balance sheet. … That's kind of the ideal scenario."

But Scola also acknowledges stablecoin reserves could still exit the banking industry altogether. If deposits move to stablecoin issuers and act more or less like traditional, sticky deposits, then the impact would be relatively modest. But if erstwhile deposits leave the banking system and flit around from one stablecoin to another, they diminish the pool of sticky, reliable deposits that the banking industry requires.

"If things start moving a bit more aggressively in and out of stablecoins, and the banks aren't able to treat those deposits as stable —forgive the pun — then it makes it more difficult for them to use those deposits effectively as longer-term loans," Scola continued. "I don't think anybody has real clarity on how that's going to play out."

These questions of uptake and impact will ultimately depend on how useful stablecoins are to users, Goldstein argued, adding that stablecoins' principal attraction at the moment is their technological edge.

"The payment technology is supposed to be better. I think this is like the number one value proposition here that they are offering: a better payment technology than banks," he said. "It means that you can make payments faster. It means that you can make payments at lower transaction costs."

But that edge is sharpest and most disruptive at the moment in the area of cross-border payments rather than domestic banking. 

"If you're thinking within the U.S., it's not such a big deal because the payment system is fairly good," Goldstein said. "If you want to move money from one country to another, then supposedly doing it with a stablecoin would be better than doing it with the banking system."

Scola similarly expects early adoption to be concentrated in areas where the advantages are immediately apparent, particularly cross-border transactions. 

"I suspect until those [domestic uses] start to crop up, you're not going to see broad-based adoption, except for things like cross-border [transactions], where there's timing, efficiency, and cost savings that are almost immediately observable through using stablecoins," Scola said. "There has to be an advantage to the consumer. … I think the tool is evolving before the use cases that warrant it are."

For banks, the response may not be as simple as issuing competing stablecoins. Phillips said he expects many banks instead to become part of the infrastructure surrounding the payment technology.

"My impression is that most banks are not going to be issuing their own stablecoins, or even issuing their own tokenized deposits. Rather, what they're going to do is custody stablecoins for customers," he said. "So if customers want to receive payments in stablecoins, they can just receive those payments into their bank."

The network effect

A key to a stablecoin's utility is the number of places where you can use it, and at the moment there are a handful of major stablecoins that dominate the market. But the vast majority of stablecoins, fully 99%, are used for only one thing: trading cryptocurrencies. 

The ongoing implementation of last year's GENIUS Act could accelerate that competition. Comptroller of the Currency Jonathan Gould said in a speech Wednesday that 23 of the 40 new bank charter applications the OCC has received since President Trump took office involve some form of digital-asset activity. He said it is becoming "ordinary course" for prospective banks to incorporate payment stablecoins into their business plans, and that the OCC expects to finalize its GENIUS Act rules by November.

"Crypto is part of the business of banking, and we have been making sure that that is the case through our actions, both on the chartering front and through legal interpretations," Gould said, adding only that "what keeps me up at night is the possibility that I won't have enough people at the OCC who stand up and hear what I'm saying, and respond to it with enthusiasm and vigor."

The shape of that industry and its effect on banks remains unsettled. Goldstein said that the industries aren't directly competing with each other — yet.

"I think what we are seeing right now is kind of a mix," Goldstein said. "So far, the stablecoins and the banks have been kind of working in parallel. But the extent to which this will continue … remains to be seen."