Stablecoin Surge: Banks Brace for $6.6 Trillion Deposit Shift

The passage of the GENIUS Act last year sent ripples through the banking sector, catching many off guard despite Washington’s increasing interest in cryptocurrency. Now, industry lobbyists are urgently working to address a perceived loophole in the law, fearing it could significantly deplete deposits from the traditional banking system.

Amidst this legislative scramble, many financial institutions are grappling with how to strategically engage with the stablecoin concept, whether defensively or proactively.

The Immense Stakes: Trillions in Deposits at Risk

The potential impact is staggering. Even a 2025 report from the Trump Treasury Department, preceding the Act’s passage, acknowledged the magnitude:

• $6.6 trillion in non-interest-bearing transactional deposits are vulnerable within the banking industry. This figure represents approximately one-third of all deposits held by U.S. commercial banks.

These projections are not theoretical. Accenture’s “Top Banking Trends 2026” report highlights similar shifts already observed in other countries, such as Argentina. “If this shift scales, it could displace traditional deposits, strain funding and lending capacity and weaken monetary effectiveness,” the report warns.

Accenture further notes that the long-standing banking model, which profited from deposit stability and customer inertia in low-yield accounts, “now appears increasingly unsustainable.”

Key Developments and Emerging Challenges

• The debate continues in Washington over the payment of quasi-interest on stablecoin “deposits,” a point the banking lobby believed it had secured in the GENIUS Act.
• Despite this, platforms like Coinbase actively promote “rewards” on stablecoin holdings within their systems. For instance, USDC, described as “crypto that is held to a higher standard” under the Act, can offer returns as high as 3.5%.
• A consortium of banking associations has voiced strong opposition, stating in a letter to the Senate that “Policies that undermine bank and credit union deposits destroy local lending.”
• Industry consensus suggests stablecoin risk will impact commercial deposits sooner than retail accounts. Low-cost business demand deposit accounts have historically been a critical funding source for banks.
• Experts anticipate the initial incursions of stablecoins will occur in international transactions, propelled by ever-steepening adoption curves.
• Significant stablecoin competitors are already active, including newly chartered banks with crypto roots and tech expertise like Erebor, and hybrid bank-fintech entities such as SoFi.

An Industry Navigating Stablecoin Flux

Duane Block, Managing Director for Digital Assets at Accenture, observes, “So far, what we’ve seen is big banks innovating and community banks advocating, and by advocating, I mean really acting to protect their deposit base.”

The coming months are crucial, holding the key to the future of stablecoins as the “interest” issue is resolved. Block emphasizes, “That will reveal whether there’s a real revenue-generating opportunity or whether this will be a defensive paradigm shift.”

Reflecting on the rapid evolution, Block points out the unprecedented regulatory coordination: “If you look at the President’s working group report back at the end of July and then look at the lockstep movement of different regulators in support of those recommendations, the collaboration has been unparalleled.”

While economic drivers are potent, Block questions whether customer loyalty will ultimately prevail. “At the end of the day, people with relationships may or may not respond to just one economic driver,” he suggests, acknowledging the long-standing reliance of local banks on customer relationships.

Strategic Pathways: What Should Banks Do Now?

Beyond the largest institutions and specialized crypto trust banks, many financial players are still seeking direction on stablecoins. Chris Dean, CEO of Treasury Prime, notes a common sentiment among banks: “They say, ‘We have to do something right now. It’s very important.’ And I say, ‘Great, what do you want to do?’ And they say, ‘We have to do something right now — it’s very important!’”

Dean identifies three tangible steps banks can consider:

1. Create Your Own Stablecoin or Tokenized Deposit: This can be pursued individually by a bank or through consortiums. For most, individual creation is out of reach, while consortiums present a more feasible yet still challenging path. Dean cautions that below the political leadership, career regulators remain focused on compliance and safety, with money laundering being a primary concern for stablecoin use.
2. Refocus to Become a Crypto Bank: While specialization can be appealing, Dean considers this a substantial undertaking, especially given that well-established crypto players like Erebor and Cross River Bank are already deeply embedded in the business.
3. Offer “Pay In, Pay Out” Services: Colloquially, this involves providing customers with a bank-based on/off ramp, allowing them to move bank deposits into the stablecoin ecosystem for payments and accept stablecoin payments back into traditional banking. This strategy keeps funds within the bank until they are needed for external payments. It functions similarly to local roads connecting to interstate highways, offering an additional payment rail alongside wires, ACH, and instant payment channels like FedNow and The Clearing House Real Time Payments.

For businesses engaged in international transactions, stablecoins offer a compelling mechanism. Tony DeSanctis, Senior Director at Cornerstone Advisors, highlights a firm that relies on PayPal’s stablecoin for offshore inventory purchases, appreciating its flexibility for recipients to convert to their preferred currency.

Duane Block also points to other specialized roles banks can adopt, such as becoming a stablecoin custodian. He anticipates these possibilities will become clearer once Congress finalizes the second round of stablecoin legislation, often referred to as the “CLARITY Act.”

Retail vs. Business Adoption: Who Benefits More?

Current consensus suggests stablecoins hold greater appeal for businesses, particularly for international payments, rather than for individual consumers. They are especially suited for transactions to and from markets with less stable local currencies, as GENIUS Act-compliant stablecoins are typically backed 1:1 by U.S. Treasury securities or actual dollars.

“The volume is there, on the retail side, but it’s really tiny,” notes Chris Dean, who, as a “tech guy,” finds the idea of paying for lunch with stablecoins appealing, though he admits it’s a niche perspective.

For consumers, early experiences have often been described as clunky and somewhat concerning. Lily Varon, Principal Analyst at Forrester, highlights fears surrounding the loss of access codes to “self-custody” stablecoin wallets, which could render funds irretrievable.

Forrester’s annual payments forecast for 2026 predicted no scalable use case for retail stablecoins. The report also added, “For merchants, processor costs and integration challenges often negate any promised fee savings.”

Michael Abbott, Senior Managing Director and Global Banking Lead at Accenture, suspects, “Stablecoins are not going to be an issue for the consumer side.” He asserts that “Consumers will still be keeping their deposits in the bank. Your paychecks are not going to go into stablecoins.” However, he concedes that stablecoins could evolve into a mechanism facilitating rapid fund movement out of banks for deposit optimization via agentic AI.

An exception lies in international remittances. DeSanctis foresees stablecoins augmenting existing remittance systems, pointing to Western Union’s announcement of its U.S. Dollar Payment Token last fall.

One critical question lingers: Could the rise of stablecoins potentially trigger future bank runs, reminiscent of the recent “regional bank crisis?”

Source: TheFinancialBrand.com