Standard Chartered warns U.S. banks could lose $500 billion to stablecoins by 2028, highlighting risks to traditional finance.
Standard Chartered has projected that U.S. banks may see a staggering $500 billion outflow of deposits to stablecoins by the end of 2028. This forecast highlights the growing structural risks that the adoption of stablecoins poses to traditional finance.
This anticipated outflow represents approximately one-third of the expected $2 trillion market cap for stablecoins. The bank previously estimated that around $1 trillion in deposits could transition from emerging markets to digital dollar counterparts.
Jeffrey Kendrick, head of digital asset research at Standard Chartered, pointed out that the shift towards blockchain technology for payments is intensifying risks. The situation is further complicated by delays in passing the Clarity Act, which is crucial for regulating the stablecoin industry in the U.S. He noted, “This issue has brought major banks into conflict with Coinbase,” as the exchange opposed the latest version of the bill, which could hinder stablecoin issuance and storage.
Additionally, Bank of America's head has raised alarms about the potential risks to traditional banking, suggesting that if interest accrual on stablecoins is allowed, banks could face losses of up to $6 trillion.
Regional Banks at Risk
Standard Chartered's analysis indicates that regional banks are particularly vulnerable due to their heavy reliance on deposit funding, while diversified banks face moderate risks. Investment banks and brokers are the least affected since their income is less dependent on deposits.
Kendrick explained that the migration of deposits to stablecoins would directly pressure financial institutions' revenues, as deposits are critical for interest margins.
- U.S. regional banks are most at risk due to high dependency on deposits.
- Diversified banks encounter moderate risk levels.
- Investment banks and brokers experience the least impact from this trend.
Liquidity Threats and Market Dynamics
The report also identifies factors that worsen liquidity outflow risks. Major stablecoin issuers like Tether and Circle maintain only a fraction of their reserves in bank accounts, limiting the return of capital to traditional financial systems.
Standard Chartered estimates that two-thirds of stablecoin demand originates from emerging markets, leading to the projected $500 billion loss for U.S. banks. Kendrick cautioned that the effects of these trends will vary, and the resilience of banks will hinge on their capacity to adapt their funding models and embrace tokenization.
Amid these changes, the supply of dollar stablecoins currently exceeds $300 billion. Should Standard Chartered's predictions materialize, this figure could triple, pushing the market towards $2 trillion by 2028. Notably, Tether has introduced USAT, a federally regulated stablecoin for the U.S. market.
