Standard Chartered projects U.S. banks could lose more than $500 billion in deposits to dollar-backed stablecoins by 2028, according to new research. The analysis warns that the accelerated adoption may threaten traditional funding models for banks. This comes as regulatory clarity improves and digital tokens find more uses in payments, settlements, and on-chain financial activities.
Regional U.S. banks face the highest exposure, the report finds, because they depend heavily on retail deposits and net interest income. As yield-bearing stablecoins expand, deposit substitution could pressure profitability faster at smaller lenders than at diversified banking groups with broader revenue streams, capital market operations, and balance sheets.
Supply has already risen by around 40% YoY, thus surpassing $300 billion. This may drive its adoption in payments and settlements. Clearer crypto regulations and supportive legislation may legitimize stablecoin as an instrument for commerce, cross-border settlements, and blockchain-based financial infrastructure.
Payment Shifts Erode Net Interest Margin
The analysis is based on the net interest margin, which is a key driver of bank profitability. The net interest margin is a measure of the difference between the interest earned on loans and the interest paid on deposits. According to Geoff Kendrick, the payment shift towards stablecoins erodes the net interest margin and the traditional banking business model in the US banking system.
The findings of Standard Chartered indicate that regional banks are the most affected. Unlike diversified banks, which have a wide range of businesses and income streams, regional banks derive a higher proportion of their income from interest. This shows that diversified banks and investment companies are the least affected within the current adoption trajectory model assumption.
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Stablecoin Market Structure and Legislative Impact
Stablecoins dominate the cryptocurrency payment and settlement landscape. Despite their large market share, stablecoin issuers have limited reserve balances held in traditional bank deposits. This limits the positive impact on traditional banking business models that experience deposit outflows due to the growth of on-chain adoption.
Standard Chartered estimates that the stablecoin market is projected to reach $2 trillion by 2028. This will result in a $500 billion loss of bank deposits in developed markets. Legislative clarity is still a concern. However, the bank expects the US market structure regulation to be passed by the end of the first quarter of 2026.
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