Banks have warned that stablecoins, especially those that pay yield, could pull deposits out of the banking system, but policy and finance experts say there is little evidence of this so far.
Major US bank Standard Chartered recently estimated in a research note that the growth of stablecoins could deplete bank deposits. The report estimates that “US bank deposits will decline by one-third of stablecoin market capitalization,” which is currently $308.15 billion according to DeFiLlama data.
The debate has intensified as US lawmakers consider whether to ban interest on stablecoin holdings under the proposed version of the Cryptocurrency Market Structure Act and the Clarity Act, which has been held up due to protests from within the crypto industry despite support from the banking sector.
Banks argue that allowing high-yielding stablecoins could accelerate deposit flight, but critics say the risks remain largely theoretical.
Evidence of deposit outflows is limited
Aaron Klein, senior economic research fellow at Brookings, told Cointelegraph that stablecoins have so far been used primarily for crypto-related activities and as stores of value in non-dollar countries. “You will find little evidence that stablecoins have depleted bank deposits,” he says.
Related: US banking lobby claims stablecoin shutdown will be top priority in 2026
European regulators are likely to share a similar view. A representative from the European Banking Authority (EBA) said that stablecoins in the European Union are primarily treated as a means of payment within the cryptocurrency ecosystem, and their use by consumers remains low. “Due to the current low engagement in the use (or usage) of stablecoins within the EU, we do not see any current risk of currency substitution, capital flight or dollarization,” they said.
Still, Klein suggested this could change. He emphasized that what is clear is that “if stablecoins become as popular as their proponents claim, they are likely to lead to an outflow of bank deposits.”
Klein said this would reduce available capital because “bank deposits support bank lending, so a decline in bank deposits reduces the supply of credit available through bank-based products.”
Similarly, an EBA representative told Cointelegraph that a significant increase in the use of stablecoins would create the potential for “financial stability risks from stablecoins jointly issued by EU and non-EU institutions.”
These risks include attachment risks, cross-border legal frictions, regulatory arbitrage, and supervisory challenges. An EBA representative said that dollarization is primarily a concern for emerging markets and that “no transition from euro-denominated payment assets to USD-backed stablecoins is expected in the EU.”
A representative from one major EU central banking organization had a more positive view of stablecoin-related technologies. He suggested that tokenized deposits and well-regulated euro-based stablecoins could strengthen Europe’s strategic autonomy by reducing dependence on third-country stablecoins. ”
Still, he noted that while stablecoins could pose a threat to financial stability due to their interconnectedness with traditional finance, EU regulations are aimed at mitigating these risks, and the European Central Bank is monitoring related developments.
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Stablecoin supporters disagree
Colin Butler, head of markets at Mega Matrix, said banning compliant stablecoins from offering yield would sideline regulated institutions while accelerating the movement of capital beyond U.S. oversight and failing to protect the U.S. financial ecosystem.
Jeremy Allaire, CEO of publicly traded stablecoin issuer Circle, recently said stablecoin interest payments are not a threat to banks.
Speaking on stage at the World Economic Forum in Davos, Allaire said concerns about such bank runs were “absolutely absurd.” He argued that yields “help stickiness, help customer traction” but cannot undermine monetary policy.
Earlier this month, Anthony Scaramucci, founder of asset management firm SkyBridge Capital, argued that banks simply “do not want to compete with stablecoin issuers, so they are inhibiting yields.”
In January, China’s central bank, the People’s Bank of China, allowed commercial banks to pay interest on digital yuan deposits. Scaramucci suggested this could give China an advantage over the United States.
“On the other hand, China is issuing yields. So what do you think emerging countries will choose for their rail systems, with or without yields?” he said.
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