Analysts and consultants have been making dire predictions that stablecoins will threaten traditional banks' deposits. The Treasury Department has estimated that stablecoins in circulation will reach $2 trillion in 2028, and some have suggested that much of this will be drained out of consumer and business deposit accounts.
But if this is so, U.S. banks aren't feeling it.
I asked a panel of bankers at Finovate this week if they are seeing any effect from the resurgence of stablecoins since the GENIUS Act came out.
"I'll go first. No," said Josh Williams, chief business officer and head of partnerships at Seattle Bank, a $1 billion-asset community bank.
Stablecoins are one of many looming threats to community banking, he said, but generally speaking, customers are looking for an interest rate on their deposits.
"It does not make any sense to dismiss paying your customers for their deposits at a market rate as a strategy," Williams said. "How did Capital One get to be as big as it was? How did Ally get to be as big as it is? Discover? Marcus? They went out and realized we have built businesses that have high-yielding assets, and those assets will support competitive rate deposits. Every single bank should be thinking more about how they're going to evolve their business to do that."
Banks that have a strategy for which stablecoins make sense, should go for it, he said.
"And somebody should, the same way there are banks that lead in trade finance, FX, swaps, all sorts of things that are more and more specialized," Williams said. "But that in no way means that all 9,000 banks should think that stablecoins are relevant to them when there are much more, truly existential threats to their business and the industry."
Leslie Kim, senior vice president and business banking general manager at Minneapolis-based U.S. Bank, asked, "What problems is it solving? It has to solve a problem for business clients."
Her team is thinking about the ways banks can work with stablecoins: direct issuance, strategic partnerships and consortiums.
"We continue to evaluate these three different options, making sure that we are staying abreast and just adapting to the regulatory environment," Kim said.
At First Citizens Bank in Raleigh, North Carolina, "We're thinking very carefully about the possibilities," said Christopher Hollins, head of treasury management sales and delivery. At the same time, the bank's leaders are thinking about core principles and what it might be able to do while maintaining client trust.
"The last thing we want to do is to be out there first, get that first mover advantage, but not have the regulatory infrastructure that's necessary to give people, especially our risk officer, reasonably low stress, because that job is not low stress," Hollins said. "Our organization is being principled around what it is that we're willing to put our toe into the water."
Where the real threat lies
These bankers said they do see their competitive threats coming from large banks and challenger banks.
"The true challenger banks that are winning, are embedding themselves into the cashflow workflows of these corporates, and that's what we're starting to see, and that's what we're starting to advance," Kim said. "One big challenge that we have is, how do we continue to maintain primacy with our customers? We do that by building relationships. We also want to make sure that we are partnering with different fintechs, institutions, etc., to make sure that we're really building the solution that makes sense for our clients. So at the end of the day, our challenge is to make sure that we continue to innovate and bring software solutions to our customers."
Hollins also said challenger banks are rivals for deposits. "We can't just rely on people coming in and depositing with us," he said. "We can't just do basic sweeps and basic commercial bank capabilities for our clients. We need to be thinking about what's happening in challenger banks, thinking about having that seamless workflow."
Tiffani Montez, principal analyst at Emarketer, supported the bankers' viewpoints.
"Banks are fighting a deposit war on two fronts: fractured customer loyalty and rising nontraditional threats," Montez told American Banker. "Consumers are already spreading their money across an average of seven financial products, with more than half held outside their primary bank. That fragmentation makes it harder to defend deposits. Winning deposits will not come from higher rates alone. It will come from relevance — anticipating customer needs, embedding into their financial lives, and acting as a true financial partner at every stage."
