Key Takeaways :
- Banks warn that yield-bearing stablecoins could accelerate deposit outflows and weaken traditional lending capacity.
- Regulators in the US and EU currently see limited empirical evidence of stablecoin-driven bank runs.
- Stablecoins are still mainly used within crypto markets or as a dollar substitute in non-USD economies.
- If adoption scales to mainstream payments and savings, financial stability risks could materially increase.
- Yield restrictions may unintentionally push capital into less regulated or offshore environments.
- Tokenized deposits and regulated euro- or dollar-denominated stablecoins could become a strategic alternative.
Introduction: A New Kind of Bank Run?
The global banking sector is increasingly alert to a new, distinctly digital threat: the possibility that stablecoins—particularly those offering yield—could siphon deposits away from traditional banks. While the idea of a “bank run” historically conjures images of depositors lining up outside physical branches, today’s concern is quieter, faster, and borderless.
Major banks argue that if consumers and institutions begin holding stablecoins instead of bank deposits, the core funding base of the banking system could erode. Regulators, however, are more cautious. According to policymakers and financial researchers, the data so far does not support the claim that stablecoins are meaningfully draining bank deposits—at least not yet.
This debate has intensified alongside legislative discussions in the United States, particularly around whether stablecoin issuers should be prohibited from offering interest. The implications extend far beyond crypto markets, touching on monetary policy transmission, credit creation, and the future structure of money itself.
Banks’ Concerns: Deposits as the Foundation of Credit
In a recent research note, Standard Chartered estimated that roughly one-third of the global stablecoin market capitalization could correspond to a decline in US bank deposits. At the time of writing, total stablecoin market capitalization stands at approximately $308.15 billion, according to DeFiLlama.
From a banking perspective, this matters deeply. Bank deposits are not idle funds; they are the raw material for lending. Through maturity transformation, deposits enable banks to extend credit to households and businesses. If deposits shrink, banks’ ability to lend shrinks as well.
Banks are particularly concerned about yield-bearing stablecoins, which resemble savings products more than transactional tools. If consumers can hold a dollar-pegged token, earn yield, and enjoy instant settlement without banking friction, the competitive pressure on banks could intensify dramatically.
Regulatory Reality: Limited Evidence So Far
Despite these warnings, many economists argue that the feared deposit flight remains largely theoretical.
Aaron Klein, senior fellow in economic studies at the Brookings Institution, notes that stablecoins have historically been used for two primary purposes: facilitating crypto trading and serving as a store of value in countries with unstable local currencies. In his view, there is little concrete evidence that stablecoins are pulling meaningful volumes of funds out of US or European banks.
European regulators share a similar assessment. Officials from the European Banking Authority have stated that, within the European Union, stablecoins are mostly used inside the crypto ecosystem and see limited adoption among retail consumers.
As a result, risks such as currency substitution, capital flight, or “digital dollarization” are currently viewed as minimal within the EU.
Chart: Growth of the Stablecoin Market
Growth of the Global Stablecoin Market (USD, billions)
This chart illustrates the rapid expansion of stablecoins from 2020 to 2025, highlighting why banks are increasingly focused on their systemic implications.
When Theory Becomes Reality: Scaling Risks
While regulators see limited risk today, they acknowledge that circumstances could change quickly. Klein himself notes that if stablecoins were to achieve mass adoption for everyday payments, payroll, or savings, the impact on bank funding could become material.
A decline in deposits would not only reduce lending capacity but could also shift credit creation away from regulated banks toward capital markets or non-bank entities. This could weaken traditional monetary policy channels, which rely heavily on banks to transmit interest rate changes into the real economy.
The EBA similarly warns that if stablecoin usage were to scale dramatically—especially through cross-border or jointly issued coins—financial stability risks could emerge. These include legal uncertainty across jurisdictions, regulatory arbitrage, and supervisory blind spots.
Europe’s Strategic Angle: Tokenized Deposits and Sovereignty
Interestingly, some European central banking voices are more optimistic about the underlying technology. Officials close to the European Central Bank have suggested that tokenized bank deposits or well-regulated euro-denominated stablecoins could strengthen Europe’s strategic autonomy.
Rather than relying on US dollar–based stablecoins issued abroad, Europe could develop compliant digital money instruments that integrate seamlessly with the existing banking system. This approach aims to preserve financial stability while embracing efficiency gains from blockchain technology.
At the same time, these officials acknowledge that excessive interconnection between stablecoins and traditional finance could amplify shocks, which is why the ECB continues to closely monitor developments.
The Stablecoin Industry Pushback
Stablecoin advocates strongly dispute the idea that yield-bearing tokens pose a systemic threat.
Colin Butler, head of markets at Digital Asset, argues that banning yield on compliant stablecoins would disadvantage regulated institutions while pushing capital into unregulated or offshore alternatives. In his view, such restrictions would weaken—not protect—the US financial ecosystem.
Similarly, Jeremy Allaire, CEO of Circle, has dismissed bank run fears as exaggerated. Speaking at the World Economic Forum in Davos, Allaire described these concerns as “completely absurd,” emphasizing that yield can enhance customer retention without undermining monetary policy.
Competition, Not Stability?
The debate took a sharper tone when Anthony Scaramucci suggested that banks are opposing yield-bearing stablecoins not for stability reasons, but because they do not want competition.
He contrasted the US stance with China’s approach. In January, the People’s Bank of China allowed commercial banks to pay interest on digital yuan deposits. According to Scaramucci, this policy could give China a strategic edge in emerging markets choosing between yield-bearing and non-yield digital payment infrastructures.
Implications for Investors and Builders
For readers seeking new crypto assets, revenue streams, or practical blockchain use cases, this debate is critical.
Yield-bearing stablecoins could evolve into a new financial primitive—blurring the line between money, savings, and investment. For builders, opportunities lie in compliance-focused infrastructure, tokenized deposits, and cross-border settlement systems. For investors, the key risk is regulatory: policy decisions around yield could reshape the competitive landscape overnight.
Conclusion: A Question of Timing, Not Possibility
The idea that stablecoins could trigger a modern bank run is not fantasy—but it is not reality yet. Today, the evidence suggests limited impact on traditional banking systems. Tomorrow, if adoption accelerates and yield becomes mainstream, the calculus could change.
The challenge for regulators is to strike a balance: preventing systemic risk without stifling innovation or driving capital into the shadows. For banks, the message is clear—competition from programmable money is no longer hypothetical. For the crypto industry, legitimacy and compliance may prove to be the strongest growth catalysts of all.
