- Key insight: The Conference of State Bank Supervisors' latest annual survey of community bankers reveals hesitation about the introduction of stablecoin services.
- What's at stake: The majority of respondents are concerned that stablecoin adoption will lead to siphoned deposits and reduced lending capacity.
- Forward look: While some community banks said they plan to offer stablecoin services within the next 12 months, the overwhelming majority said they had no plans to do the same.
A majority of community bankers are concerned that stablecoin adoption will result in deposit erosion and reduced lending capacity, according to a new survey of banks with up to $10 billion of assets.
In fact, 60.2% of the survey respondents said they viewed potential deposit outflows and the reduced ability to make loans to be the "most impactful" or "moderately impactful" effects from the emerging stablecoin market.
The overwhelming majority of the community banks surveyed by the Conference of State Bank Supervisors said they don't offer stablecoin services and don't plan to do so in the next 12 months. Less than one percent of the respondents said they currently offer stablecoins.
The results, released Tuesday during the Federal Reserve Bank of St. Louis' annual Community Banking Research Conference, suggest there's strong support among community bankers for uniform regulatory frameworks around stablecoins.
The banking industry has been working to prevent stablecoin issuers or crypto exchanges from being able to offer yield-like products on stablecoin holdings. Banks have argued that allowing these rewards to be paid would turn stablecoins into products that largely mirror highly regulated core deposits, which are a major component of the banking system.
The stablecoin yield dispute came up in a recent version of a Republican-backed crypto market structure bill that included bank-favored yield changes. But the Senate voted it down last month.
In comments released with the survey of community banks, Jim Kisch, president and CEO of $934.5 million-asset Passumpsic Savings Bank in St. Johnsbury, Vermont, said the idea of "trillions of dollars migrating out of the traditional banking system is deeply concerning."
"The primary objective for our industry must be ensuring a level playing field," Kisch said. "We must prevent nonbank competitors from exploiting regulatory arbitrage and ensure that rules are enforced uniformly across the board to safeguard our exceptionally strong banking system."
Several questions about stablecoins, tokenized deposits and AI were added to the CSBS' latest annual survey, which drew responses from 330 banks in 35 states. The insight into community bankers' stance on stablecoins — the responses were collected during a three-month period between April and July — comes ahead of the anticipated implementation of the GENIUS Act in early 2027.
Stablecoins are dollar-backed cryptocurrency tokens. The GENIUS Act, which was
Stablecoins have not yet gained broad adoption as an everyday payment method, but there are concerns that such services could disrupt certain parts of the banking industry as interest continues to grow and the rules of implementation become more clear.
Community banks could be at a higher risk of disruption than their larger counterparts. Todd Phillips, a director at Klaros Group and a former official at the Federal Deposit Insurance Corp., has argued that
"My perspective is that stablecoins could certainly take deposits out of, for example, community banks," Phillips told American Banker in August. "You're not going to have a giant stablecoin issuer like Circle putting reserves into community banks. They're going to use JPMorganChase or a much larger company."
At the moment, community banks on the whole aren't seeing much demand for stablecoins, according to Thomas Siems, chief economist at the Conference of State Bank Supervisors, a trade association whose members include financial regulators from all 50 states.
"There's not a clamoring out there from the customer base," Siems told American Banker.
While the majority of survey respondents said they don't offer stablecoins and have no plans to begin offering such services over the next 12 months, about 16% said they do plan to do so in the coming year. About 17.5% said they plan to begin offering tokenized deposits, while about 12% said they expect to introduce cryptocurrency services by next year.
Still, those plans could change over the next several years. Twenty-one percent of the survey respondents said stablecoins could offer "promising opportunities" for banks over the next five years. When asked the same question about tokenized deposits, 23% responded affirmatively, while AI for customer interactions came in at 49%, and expansion of mobile banking services was at about 76%.
Among the bankers who plan to offer stablecoin services, most said they would tap into core service providers, according to Julianne Baer, a senior manager of the Federal Reserve Bank of St. Louis who helped present the survey findings on Tuesday.
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Overall, though, most community bankers don't seem to be rushing into stablecoins, she noted.
"Bankers tend to view stablecoin adoption as a greater risk … than as an opportunity, showing little confidence that it will generate new revenue or significantly improve payment speed or accessibility," Baer said at the conference.
United Bank in Zebulon, Georgia, is "spending a lot of time thinking about" stablecoins and tokenized deposits, CEO James Edwards said in comments released with the survey results. He said he doesn't "see a significant disintermediation threat from stablecoins right now," but he does expect usage to expand, especially with regard to cross-border payments.
"The greater issue, in my mind, is the reality that nonbanks can offer these types of products without being subject to the same regulatory environment that we live every day," Edwards said.
The $2.2 billion-asset United will "probably introduce something with tokenization down the road," he added. "We just want to do it the right way."
