Stablecoins Paying Interest Could Spark a $6.6T Bank Deposit Flight, ABA Warns

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ABA warns interest-bearing stablecoins could trigger $6.6 trillion in bank deposit flight

The American Bankers Association is concerned that if stablecoins start paying interest, a large number of people might move their money out of traditional banks.

Summary

  • American Bankers Association said the White House study missed the key issue, warning that allowing stablecoin yields could trigger deposit outflows from smaller banks.
  • Researchers noted that funds could move from community banks to larger institutions, raising funding costs and reducing local lending capacity.
  • Industry discussions continue around a Senate bill on crypto oversight, with stablecoin yield restrictions emerging as a key point of debate.

On Monday, the American Bankers Association (ABA) cautioned that a recent White House report underestimated the potential risks of competition from stablecoins.

The Council of Economic Advisers estimated that ending rewards for holding stablecoins would only slightly increase bank lending, by about $2.1 billion. However, the American Bankers Association believes that government officials are measuring the wrong things.

Rather than focusing on increased borrowing, the industry group argues the government should prioritize the risk of people withdrawing their money from banks. They point to a 2025 Treasury Department estimate showing that widespread use of stablecoins could lead to $6.6 trillion leaving U.S. banks.

Community banks at risk

According to ABA economists Sayee Srinivasan and Yikai Wang, a key concern right now is whether stablecoins that earn interest could pull deposits away from smaller community banks.

Researchers predict that even with a stable amount of money in the economy, funds will likely move from smaller community banks to larger ones. This could make it more expensive for smaller banks to borrow money, which would likely result in higher loan costs and reduced access to credit for people and businesses in small towns.

Representatives from banks and cryptocurrency companies are talking about a new bill in the Senate that would create rules for digital assets like Bitcoin and other cryptocurrencies.

A key sticking point in reaching a deal on the bill is whether it’s legal for stablecoins to offer interest payments. This issue needs to be resolved before the bill goes up for debate later this month.

Competitive pressure from crypto

Researchers at the American Bankers Association found that people and businesses are clearly drawn to stablecoins because of potential financial benefits. The group admitted that customers are likely to choose these digital assets over traditional bank accounts due to the possibility of earning higher returns.

Coinbase CEO Brian Armstrong has criticized banks for opposing higher interest rates, noting that traditional banks have long profited from offering very low interest on customer deposits.

As a crypto investor, I found Armstrong’s point really interesting – he believes stablecoin yields could actually push traditional banks to offer more competitive rates. Basically, it could level the playing field, forcing them to step up their game.

The American Bankers Association (ABA), representing both large companies like JPMorgan Chase and Citigroup and many smaller banks, is still actively pushing for strong regulations on digital assets.

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2026-04-14 09:33