Bank deposits have always been considered one of the safest and stickiest parts of the financial system.
But their dominance as a safe haven is facing a new kind of competition. Not from rival banks or money market funds, but from the digital assets.
Standard Chartered warned in a recent note that the growing adoption of dollar-pegged stablecoins could quietly siphon deposits out of the traditional banking system. This is a structural risk for banks in both the United States and abroad, even without a crisis or classic bank run.
Related: Explained: What is a stablecoin?
Why stablecoins are a deposit risk for banks
A stablecoin is a cryptocurrency designed to maintain a stable value, usually pegged to a fiat currency like the U.S. dollar.
The latest warning comes from Geoff Kendrick, Standard Chartered's global head of digital assets research.
In a note circulated this week and viewed by CoinTelegraph , Kendrick said delays around the US CLARITY Act are a reminder of what's truly at stake.
"We estimate that U.S. bank deposits will decrease by one-third of stablecoin market cap,"Kendrick wrote.
With U.S. dollar-pegged stablecoins representing roughly $301 billion in market value, according to CoinGecko, that implies tens of billions of dollars could migrate out of the banking system.
"We estimate that around two-thirds of stablecoin demand comes from emerging markets at present, so one-third comes from developed markets,"he wrote.
He said that if the stablecoin market grows to around $2 trillion, banks in developed economies could see roughly $500 billion in deposits flow out by the end of 2028, while emerging-market banks could lose close to $1 trillion over the same period.
The report lands amid growing tension between banks and crypto firms over crypto structure bills.
The biggest point of contention between crypto players and banks has been the yield on stablecoins. According to banks, allowing stablecoin yield would pull deposits out of the traditional banking system, weaken net interest margins, and increase bank-run risks.
Crypto community counters that stablecoins already generate yield through reserves and market activity, and banning rewards unfairly protects banks and stifles competition.
The debate has intensified around proposed U.S. legislation like the CLARITY Act. Exchanges like Coinbase have opposed these restrictions, arguing that they would limit innovation and institutional adoption.
Standard Chartered is not the only one that has issued such a warning for bank deposits.
Just a couple of days ago, Bank of America CEO Brian Moynihan warned that as much as $6 trillion in bank deposits could move out of the banking system into stablecoins. That is roughly about 30-35% of the total commercial bank deposits in the country.
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Regional banks face the most pressure
Kendrick focused on net interest margin (NIM), the spread between what banks earn on loans and what they pay on deposits, as the clearest measure of exposure. Since deposits are the foundation of NIM, anything that pulls them away hits bank profitability directly.
In that case, regional U.S. banks are the most exposed, while diversified banks and investment banks face less risk.
Kendrick pointed out Huntington Bancshares, M&T Bank, Truist Financial and CFG Bank as particularly vulnerable.
A key issue is where stablecoin reserves actually sit.
If stablecoin issuers recycled deposits back into the banking system, the net effect would be minimal.
But that's not the case. Kendrick estimates Tether holds just 0.02% of reserves in bank deposits, while Circle holds about 14.5%. This means very little money flows back to banks.
Stablecoin supply shrinks as Bitcoin slides
Standard Chartered's warning highly contrasts with the findings of the market intelligence platform, Santiment. According to them, stablecoin supply has actually been shrinking.
Over the past 10 days, Santiment reported that the combined market capitalization of the top 12 stablecoins has fallen by roughly $2.24 billion. The drawdown has tracked Bitcoin's decline from about $95,000 to the $88,000 range.
"Normally, when traders sell Bitcoin or altcoins, that money stays in crypto as stablecoins,"Santiment noted. "A falling stablecoin market cap shows that many investors are cashing out to fiat instead of preparing to buy dips."
Two forces appear to be driving the move: crypto benchmark Bitcoin's historically weak performance during periods of macro stress and a classic flight to a more established safe haven, which is gold.
Related: Analyst revamps Coinbase rating as Clarity Act hearing nears
This story was originally published by TheStreet on Jan 27, 2026, where it first appeared in the MARKETS section. Add TheStreet as a Preferred Source by clicking here.
