- Where stablecoin is headed is anyone’s guess, but that’s all the more reason to plan for a range of scenarios, some of which could have a profound impact on bank deposits.
- If customers adopt stablecoin for day-to-day payments, this could transform stable low-cost operating deposits into concentrated high-cost collateral pools held at the largest banks.
- Stablecoin adoption won’t spread like peanut-butter across customer segments. So the urgency and nature of planning will depend on the degree to which each bank’s customer base is susceptible to stablecoin’s potential benefits.
Amid its uncertain outlook, stablecoin continues to generate a mix of enthusiasm and anxiety across the financial landscape. The hype is certainly there, with Tether reportedly raising funding at a $500B valuation, and some industry thought leaders are projecting that by 2030 tokenization could account for 10 percent of total U.S. GDP. In a recent Curinos Perspective on the topic, we focused on use cases for stablecoin by type of customer. For some, like international money movement, stablecoin offers clear benefits, but the volumes are concentrated in specific segments. For others, like everyday retail transactions, the market is vast, but the benefits over already existing payments rails are less obvious. And then there’s the possibility of fully agentic finance, but that requires parallel innovation and adoption of technologies such as smart contracts.
All of this has bank executives asking where this might be heading and, critically, what can be done to capitalize on opportunities while managing the risks. What impact will stablecoin have on deposits? And what should I do about it, and when?
Some Background on the Deposit Market
Today, U.S. banks hold about $18.1 trillion in deposits, and credit unions hold another $1.8 trillion in member funds. Of the $18.1 trillion in bank deposits, about 40%, or $7.5 trillion, are in checking accounts (Figure 1). About 50% of these deposits are held by the top 10 banks, another 40% by the next 90 largest banks and about 10% by the remaining 4,400. Collectively, these deposits pay an average of about 2%. This is the pie that’s at stake. As a reminder, about 70% of those deposits are then lent out to individuals and businesses.
Figure 1: Deposits in U.S. Commercial Banks
What Does Stablecoin Disintermediation
of the Deposit Market Look Like?
Customers would theoretically convert dollars to stablecoins for one of two reasons: to benefit economically and to facilitate making and receiving payments.
To the first point, there’s no clear pathway today for stablecoins to offer any more meaningful structural economic benefits than holding U.S. dollars. That’s in part because financial stablecoin issuers are prohibited from paying interest on stablecoin accounts. But there’s a “rewards” loophole that allows certain incentives tied to stablecoin use (how long it stays open remains to be seen). And even if it isn’t closed, it’s far from clear whether issuers would, or could, offer rewards that are substantially greater in value than interest paid by banks. That said, their being able to do so would provide some upward pressure on funding costs.
The second point is where things get interesting. If the use cases for stablecoin pan out and a material share of payments volumes migrate from fiat to tokenized (a big if), it could very well result in businesses and individuals holding meaningfully large wallets of stablecoins. Whether this would replace or reduce bank deposits is an interesting technical question, but that’s not really the point. What matters is that this scenario would transform deposits.
Specifically, funds would leave granular low-cost, checking accounts and be concentrated in large expensive collateral pools held by the largest banks. A portion of these would be held in cash, and a portion (likely the lion’s share) would be held in U.S. Treasuries. Simply put, a bank’s most valuable deposits would be transformed into the least valuable.
That nuanced impact to total deposits mentioned earlier would depend on whom the stablecoin issuers buy their Treasuries from, whether they’re net new issuance and how the government spends the money. The bottom line is this: the more customers shift to using stablecoin for day-to-day payments, the more it will deplete the pools and value of available bank funding.
Another scenario, a bit further afield, is that customers and businesses will shift a large share of their savings, or return seeking funds, into tokenized assets or commodities such as floating-rate crypto, non-fungible tokens or tokenized fractional shares of real assets. Were this to happen, it’s possible that stablecoin would also cannibalize much of what we think of today as brokerage or custodial cash.
But Will That Actually Happen? And Will It Happen to Me?
Here’s where the fundamental use cases really matter. We don’t know exactly how stablecoin adoption will play out, but we’re pretty sure how it won’t turn out: like peanut-butter across customer segments.
The most obvious use cases would be for businesses and individuals that make and receive a large volume of international payments, so banks that have a stake in foreign exchange revenues could be affected. Beyond that, corporates operating smart contracts or integrating with other blockchain applications may adopt stablecoins for certain transactions, especially agentic or automated finance functions. This is especially true for record-keeping intensive activities.
In contrast, we expect that most small and mid-sized business will be slower to adopt. This is partly based on observed behavior—paper checks are still vastly more prevalent in B2B transactions than instant payments. And because many B2B transactions run on 15- to 30-day payments cycles, accelerating the last mile of the cash-conversion cycle wouldn’t materially impact working capital needs.
Finally, most individuals have a limited need to adopt. The existing payments rails are already fast, convenient and secure. And for many transactions, the costs are low, refunded to the consumer through rewards or non-transparent.
So if you’re sitting in a bank board room, the urgency and nature of your planning will depend on the degree to which you believe stablecoin is coming for your customers.
- The largest banks, with their immense investment budgets and balance sheets, will be part of the fabric and infrastructure of whatever the tokenized future may hold. The risks to their corporate businesses will probably be largely offset by the new business opportunities that come with the stablecoin market. Their biggest risk would likely be to their enormous, low-cost consumer portfolios. But that risk is only to the extent that mass market consumers will adopt stablecoin for day-to-day payments in significant volumes.
- For large regional banks, the risks to the mass consumer franchise still apply, but these FIs may be able to carve out meaningful differentiation by developing niche solutions around specialized commercial use cases.
- For everybody else, it basically comes down to whether stablecoin catches on for small and mid-sized business operating transactions. If it does, the results could be devastating, especially because it would likely coincide with the worst-case scenario for consumer deposits as well. But if not, these banks may find themselves largely insulated from any impact.
Figure 2: Indicative Funding Mix
Shift in a Base-Case Scenario of Approx. 15% ($1.14T) Shift of Checking to Stablecoin | |||
Bank Segment | Share of Deposits at Risk | Potential Funding Cost Impact (at 400 bp funding replacement cost) | Key Strategic Question(s) |
National Banks | 15%-20% | +50-70 bps (driven primarily by higher exposure to corp. Adoption in this scenario) | How can I monetize a position of scale in a tokenized ecosystem? How do you defend the low-cost base if stablecoin adoption accelerates in retail? |
Large Regionals | 10-15% | +35-50 bps | Can niche commercial use cases become a differentiator? |
Mid-Sized and Community Banks | 5-10% | +20-40 bps | How would small business and mass consumer adoption of tokenized payments reshape my funding model? |
While this template (Figure 2) provides a baseline risk level, actual impacts will vary significantly based on both an individual banks customer mix and the specific stablecoin adoption scenario that’s modeled.
As a Banking Executive, What Should You (and Should You Not) Be Doing Now?
- Don’t sit still. Now’s not the time for complacency.
- Take stock of who your customers are and how they might (or might not) adopt stablecoin for payments. For example, we would expect differing rates of adoption between large corporations and small businesses, and the economic incentives differ for affluent consumer vs. the mass market.
- Assess the possible impact on your deposits: How much might those customers shift to stablecoin if they adopt certain payments use cases, and what might that mean for your funding levels and costs?
- Assess what stablecoin functionality your customers will expect of you for you to retain their relationship.
- Make a plan:
- How will we build or partner to deliver the stablecoin solutions our customers will demand?
- How can we begin shifting our customer and funding strategies now to insulate us from the risks of stablecoin disruption?
Clearly, stablecoin presents deep uncertainty, but by the time its future is clear, it might be too late for many to act. Seizing the initiative requires a mix of deep thinking and practical testing and learning. Going through this journey will enable banks to come out with a deeper understanding of their customers and the deposits and payments that reflect their financial lives.
Decision & Action Takeaways
Decision to be Made | How much preparatory planning is needed to thwart the potential threat of stablecoin on a financial institution’s deposit base. |
How It Affects Total Customer Value | If stablecoin catches on as an acceptable and preferred medium of exchange, especially if it can offer interest or rewards, it would transform bank funding and redefine how to value customer relationships. |
Action Recipes
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Guardrails | Monitor balance attrition and determine how much of it is attributable to stablecoin. |
Expected KPI Lift
| In this case, success would be measured less by the degree of “lift” than by the degree of shrinkage of deposits. |
Click here to discuss with a Curinos expert what stablecoin might mean for your institution.
