Stablecoin interest could shift $6T from U.S. banks

Bank of America warns up to $6T in U.S. deposits could move to stablecoins if interest is allowed, potentially reducing banks’ lending capacity and raising borrowing costs.

Bank of America CEO Brian Moynihan has warned that allowing stablecoin issuers to pay interest could prompt up to $6 trillion—about 30% to 35% of U.S. commercial bank deposits—to shift from banks to stablecoins. U.S. Treasury Department studies suggest such a shift could significantly reduce banks’ lending capacity and raise borrowing costs, particularly for small and medium-sized businesses. Stablecoins, which typically hold reserves in short-term assets like U.S. Treasurys, operate more like money market funds than traditional bank deposits, keeping funds outside the banking system and limiting their availability for loans. Lawmakers are considering a bill to prohibit passive interest payments on stablecoins but allow rewards for activities like staking or liquidity provision. The banking sector is lobbying to restrict stablecoin yields to protect deposit bases, while the crypto industry opposes the proposed regulations. The debate highlights concerns about financial stability and the future structure of the U.S. financial system.