Standard Chartered warned Tuesday that US regional banks could lose $500 billion in deposits by 2028 if cryptocurrency stablecoins reach projected $2 trillion market capitalization.
The investment bank's analysis identifies net interest margin erosion as the primary threat to lenders dependent on deposit-based revenue.
Geoff Kendrick, Standard Chartered's head of digital assets research, calculated that one-third of stablecoin growth will come directly from developed market bank accounts. Current dollar-pegged stablecoin supply sits at approximately $301 billion according to CoinGecko data.
The projection assumes market structure legislation currently stalled in Congress will eventually pass. However JPMorgan analysts have disputed Standard Chartered's $2 trillion estimate, projecting total stablecoin market cap will reach only $500-600 billion by 2028.
Regional Banks' Deposit Dependency Creates Vulnerability
Regional US banks derive larger portions of revenue from net interest margin compared to diversified national institutions or investment banks. Net interest margin measures the spread between interest earned on loans and interest paid to depositors.
Standard Chartered's report named Huntington Bancshares, M&T Bank, Truist Financial and CFG Bank as particularly exposed institutions.
These lenders lack the diversified revenue streams available to large money center banks that generate substantial fee income from investment banking and asset management.
Bank of America CEO Brian Moynihan estimated last week that $6 trillion in bank deposits could migrate to stablecoins. That figure represents roughly 30-35% of total commercial bank deposits in the United States.
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Stablecoin Reserve Holdings Limit Deposit Recycling
Standard Chartered's analysis examined where stablecoin issuers hold backing reserves. If issuers deposited reserves in traditional banks the net deposit impact would be minimal.
However Tether (USDT) holds just 0.02% of reserves in bank deposits while Circle (USDC) maintains 14.5% in bank accounts. The remainder sits in US Treasury securities and other liquid assets outside the banking system.
This reserve composition means deposit outflows to stablecoins will not return to bank balance sheets.
The Bank Policy Institute has argued that allowing stablecoins to pay interest could accelerate deposit migration beyond current projections.
Legislative Debate Delays Market Structure Framework
The CLARITY Act remains stalled in Senate committees over provisions restricting stablecoin yield payments.
The January 2026 draft prohibits issuers from paying interest on idle stablecoin holdings while allowing activity-based rewards for transactions or liquidity provision.
Banking groups support the interest prohibition arguing yield-bearing stablecoins operate as uninsured deposits. Cryptocurrency exchanges including Coinbase have opposed restrictions on reward programs that generate significant revenue.
Standard Chartered maintains its projection that Congress will pass market structure legislation by late March 2026. The bank assumes regulatory clarity will accelerate rather than constrain stablecoin adoption in developed markets.
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