I understand why community bankers might view
But the fear that stablecoins will drain community bank deposits is not only misguided — it misses a tremendous
Charles River Associates recently completed
The results should reassure community bankers: Across all statistically valid models, they found no significant relationship between stablecoin adoption and community bank deposit outflows.
Even in their most aggressive scenario, a theoretical worst-case scenario assuming every dollar spent on stablecoins comes directly from community bank deposits, the impact would be less than 7% under extreme adoption projections and under 1% in realistic scenarios.
More telling, Charles River's analysis shows that stablecoin market capitalization and community bank deposits have generally moved in the same direction over time, suggesting common underlying economic drivers rather than a substitution effect.
The demographic analysis reveals why community banks face little direct threat: Their customer base simply doesn't overlap significantly with current stablecoin adopters. Coinbase's own data analysis in a recent Coinbase Policy Institute post, examining which financial institutions their customers use for on-boarding and off-boarding, confirms this. While community banks account for 11.1% of total deposits on their platform, community bank customers hold only 5.2% of stablecoin balances on the platform.
This isn't a weakness — it's an opportunity.
Community banks excel at serving customers who value relationship banking, local market knowledge and personalized service. These customers may not be early crypto adopters, but they represent exactly the demographic that could benefit most from the partnerships community banks could forge with stablecoin issuers.
Rather than competing with stablecoins, community banks could integrate them into their service offerings, providing customers with faster, cheaper payment options while maintaining the relationship-focused service that differentiates them from large banks.
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As someone who has used stablecoins since 2020, I can attest to their primary function: They're an on-boarding tool for buying cryptocurrency. When I transfer money from my bank to purchase a stablecoin, it's specifically to buy crypto assets. This isn't a permanent departure from the banking system; it's a temporary conversion for a specific purpose.
Similarly, cross-border remittances already represent a solid use case for stablecoins. In cross-border remittances, fees often exceed 6% of transaction value and transfers take days to complete. This is a massive opportunity for stablecoin efficiency gains, particularly among U.S. immigrant communities eager to send money home to their families. Western Union should be worried, not community banks. Community banks should be preparing to join the party.
The successful passage of the GENIUS Act
Currently, the largest use case for stablecoins is as an on-boarding mechanism for cryptocurrency purchases. Clear regulatory frameworks for digital assets will expand these use cases, creating more opportunities for community banks to integrate stablecoin services and capture new customer relationships. The Clarity Act would provide the comprehensive framework needed for these partnerships to flourish.
The success of any market structure legislation depends on respecting the carefully negotiated compromises embedded in the GENIUS Act. Attempting to relitigate those agreements in the name of broader crypto legislation would undermine both efforts.
The Charles River study demonstrates what many in the financial technology space already understand: Innovation in payments doesn't have to be zero-sum. More efficient systems benefit merchants, consumers and the broader economy. When consumers can send money faster and cheaper, they engage more actively in the financial system.
Community banks have survived and thrived by adapting to serve their customers' evolving needs. The rise of stablecoins presents another such opportunity. Instead of viewing digital dollars as a threat, community banks can position themselves as the trusted local partners who help customers navigate this new financial infrastructure.
These institutions often have the closest customer relationships and the greatest flexibility to innovate. They're perfectly positioned to become early adopters of stablecoin integration, offering their customers cutting-edge payment services while maintaining the personal touch that large banks can't replicate.
The evidence from Charles River Associates should put deposit flight fears to rest. The real question now is whether community banks will seize the partnership opportunities that stablecoins represent, or whether they'll cede this growing market to larger competitors. The choice, and the opportunity, is theirs.
