Banks Warn Stablecoin Yield Could Spark Deposit Flight, Regulators Say Risk Is Minimal
January 28 2026 – Cointelegraph
U.S. banks are sounding the alarm over the rapid expansion of “yield‑bearing” stablecoins, warning that these digital dollars could trigger a new kind of bank run by pulling deposits out of the traditional financial system. At the same time, policy analysts and European regulators argue that, to date, the threat remains largely hypothetical and that the existing data do not show any material outflow of bank deposits to stablecoins.
A banking‑sector alarm
The warning gained fresh traction after Standard Chartered Bank released a research note estimating that a sizable portion of U.S. bank deposits could be siphoned off by stablecoins. Using the current market capitalisation of stablecoins—about $308 billion according to DeFiLlama—the bank’s analysts projected that “U.S. bank deposits could fall by roughly one‑third of that amount.”
The estimate has entered a broader policy debate in Washington, where lawmakers are considering amendments to the CLARITY Act (the Crypto‑Market Structure bill) that would prohibit stablecoin issuers from paying interest on token holdings. The proposal, which has been delayed after push‑back from the crypto industry, enjoys backing from several banking lobby groups that argue interest‑bearing stablecoins would accelerate the migration of funds from traditional accounts.
What the data show
Despite the warning, the empirical evidence of a deposit exodus is thin. Aaron Klein, senior fellow in Economic Studies at the Brookings Institution, told Cointelegraph that stablecoins have so far been used primarily for transactions inside the crypto ecosystem or as a store of value in jurisdictions where the domestic currency is unstable. “There is little evidence that stablecoins have drained bank deposits in the United States,” Klein said.
Klein added that the risk narrative is conditional: if stablecoins achieve the level of adoption envisioned by their proponents, the resulting shift could indeed tighten the supply of bank‑based credit. “Bank deposits underpin lending, so a sustained outflow would reduce the amount of credit available through traditional channels,” he explained.
European perspective
Across the Atlantic, the European Banking Authority (EBA) echoes a similarly cautious stance. In an interview, an EBA spokesperson noted that stablecoins in the EU are presently treated mainly as payment instruments within the broader crypto market and see limited consumer uptake. Consequently, the regulator does not currently observe “currency substitution, capital flight or dollarisation risks.”
The EBA did flag a “what‑if” scenario. Should the use of stablecoins—especially those issued by entities outside the EU—grow dramatically, it could generate financial‑stability concerns such as cross‑border legal frictions, regulatory arbitrage and the potential for a coordinated run on stablecoin‑backed deposits. Nonetheless, the authority stressed that a shift away from euro‑denominated settlement assets toward U.S. dollar‑backed stablecoins is not expected in the near term.
A senior official from a major EU central‑banking body offered a more nuanced view, suggesting that well‑regulated, euro‑denominated stablecoins and tokenised deposits could actually bolster Europe’s strategic autonomy by reducing reliance on foreign‑issued digital assets. The same official acknowledged the interconnectedness of stablecoins with the traditional banking system but said that ongoing supervisory frameworks and close monitoring by the European Central Bank aim to mitigate any systemic fallout.
Industry pushback
Stablecoin advocates dispute the notion that yield‑bearing tokens threaten the banking sector.
- Colin Butler, head of markets at the crypto‑focused firm Mega Matrix, argues that banning interest on compliant stablecoins would merely push capital toward unregulated offshore instruments, undermining the ability of regulators to oversee the market.
- Jeremy Allaire, chief executive of Circle—the firm behind the USDC stablecoin—described the “bank‑run” narrative as “totally absurd” during a panel at the World Economic Forum in Davos. Allaire contended that modest yields improve token “stickiness” and attract users but do not pose a risk to monetary policy or banking liquidity.
- Anthony Scaramucci, founder of SkyBridge Capital, framed the debate as a competition issue, suggesting that U.S. banks are resistant to stablecoin yields because they threaten traditional deposit products. He cited China’s recent move to allow interest on its digital yuan as a potential advantage for the Asian economy in attracting capital from emerging markets.
Policy context: the CLARITY Act
The CLARITY Act, originally introduced to clarify the regulatory treatment of crypto assets, has become a focal point for the stablecoin‑yield dispute. A version of the bill under consideration would explicitly forbid stablecoin issuers from offering interest, a measure that banking groups support as a safeguard against sudden deposit migrations. Crypto industry lobbyists, however, argue that such a restriction would curb innovation and drive activity into less‑supervised corners of the market.
The legislation remains in limbo, with ongoing hearings and stakeholder consultations expected to continue through 2026.
Analytical view
- Market size vs. banking deposits – U.S. commercial bank deposits exceed $20 trillion, dwarfing the total stablecoin market cap of roughly $308 billion. Even a full conversion of stablecoin holdings into bank deposits would represent a modest share of total deposits.
- Adoption trajectory – Stablecoins have grown 30‑40 % year‑over‑year in recent months, driven largely by demand for on‑chain liquidity and cross‑border payments. If that growth continues and yields become a standard feature, the absolute amount of capital at risk could rise sharply.
- Regulatory capacity – Both U.S. and EU regulators possess tools—such as reporting requirements and capital‑adequacy standards—to monitor and respond to any emergent concentration of funds in digital assets. The key question is whether they will act pre‑emptively or wait for clear signs of stress.
- Geopolitical angle – The ability of China’s digital yuan to offer interest may give the country an edge in attracting deposits from emerging economies, a point highlighted by Scaramucci. Whether this translates into a shift away from dollar‑denominated assets remains speculative.
Key takeaways
| Issue | Current reality | Potential future risk |
|---|---|---|
| Deposit outflows | No measurable drain from banks to stablecoins; usage remains confined to crypto‑centric activities. | A sustained increase in yield‑bearing stablecoins could erode deposit bases, especially if large‑scale retail adoption occurs. |
| Regulatory stance | U.S. policymakers are debating yield bans; EU regulators see limited substitution risk at present. | Regulators may tighten oversight if stablecoin market share or cross‑border flows expand significantly. |
| Industry position | Banks push for yield prohibitions; stablecoin issuers claim yields enhance stability and user retention. | Ongoing lobbying could shape the final form of the CLARITY Act and influence global competitive dynamics. |
| Systemic implications | Stablecoins are still a peripheral component of the broader financial system. | Interconnectedness with traditional finance could generate spill‑over effects during a crisis, especially if a “run” on a major token occurs. |
Conclusion
While banking executives warn that yield‑bearing stablecoins could trigger a new form of deposit flight, the data to date do not substantiate a systemic drain. Policymakers in the United States and Europe remain divided, with some urging pre‑emptive restrictions and others opting for a monitoring‑first approach. As stablecoin adoption accelerates and the debate over the CLARITY Act intensifies, the financial ecosystem will need to balance innovation incentives against the prudent management of potential liquidity risks.
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