U.S. Banks Could Lose Up to $500 Billion in Deposits to Stablecoins by 2028

NEW YORK (GeokHUb) — U.S. banks could see as much as $500 billion in customer deposits migrate to stablecoins by the end of 2028, as dollar-pegged digital tokens gain wider adoption and reshape core banking functions, according to new industry analysis.

The potential shift highlights growing tensions between traditional lenders and crypto firms as lawmakers debate how to regulate the fast-expanding digital asset sector.

Regional Banks Face Higher Risk

Analysts warn that regional and mid-sized U.S. banks are likely to be the most exposed, given their heavier reliance on deposits to fund lending activities. The analysis focused on net interest margin income — the spread between what banks earn on loans and what they pay depositors.

As payments, transfers, and settlement activity increasingly move onto blockchain-based systems, banks risk losing a key source of low-cost funding.

Stablecoins Gain Momentum After New Rules

Stablecoins are cryptocurrencies designed to maintain a fixed value, typically pegged to the U.S. dollar. While often used in crypto trading, supporters argue they offer near-instant payments and lower transaction costs compared with traditional banking rails.

A recent U.S. law established a federal framework for stablecoins, a move widely expected to accelerate mainstream adoption. However, the legislation bars stablecoin issuers themselves from paying interest, a provision banks say does not go far enough.

Deposit Competition at the Center of the Debate

Banks argue that the rules still allow third parties, such as crypto exchanges, to offer yield on stablecoin holdings — potentially drawing deposits away from regulated lenders.

Industry groups have warned that a large-scale outflow of deposits could undermine financial stability, particularly during periods of market stress.

Crypto firms, however, counter that restricting interest payments would stifle competition and innovation in digital finance.

Where the Money Ultimately Sits Matters

The scale of deposit losses will depend in part on how stablecoin issuers manage their reserves. If reserves are held largely within the U.S. banking system, the impact on deposits could be limited.

So far, however, most leading stablecoin issuers keep the bulk of their reserves in U.S. government debt rather than commercial banks, limiting any recycling of funds back into the financial system.

With crypto legislation still under debate in Washington, the fight over stablecoins is shaping up as one of the most consequential battles for the future of U.S. banking.