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Stablecoins Could Siphon $500 Billion from Traditional Banks by 2028: Analyst

By  |  January 28, 2026
Stablecoins

Regional banks in the U.S. could see $500 billion in capital outflows by 2028 as depositors shift their savings into dollar-pegged stablecoins, according to a research note from Standard Chartered Global Head of Digital Assets Research Geoff Kendrick seen by Crypto Watch Daily. The projection is likely to add new fuel to the simmering debate in Washington over whether stablecoin holders should be able to earn yield on their crypto holdings.

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    Under the GENIUS Act signed by President Trump last year, stablecoin issuers are not permitted to pay interest or offer other incentives directly to coin holders. But traditional banks have raised concerns over possible workarounds that could allow for indirect payment of interest or other forms of yield, such as routing the payments through crypto exchanges to evade the prohibition on direct offers of yield. The banks fear such unregulated incentives could encourage capital flight that would undermine their ability to make loans and destabilize credit markets.

    Banking groups have repeatedly petitioned Congress to close what they view as a “loophole” in the GENIUS Act by explicitly outlawing indirect payment of interest on stablecoins. Banking industry lobbyists have sought to insert such language into crypto market-structure legislation currently pending in the Senate. But progress on the measure has stalled in the Senate Banking Committee, and a vote on the bill in the Agriculture Committee scheduled for this week was postponed due to snow and cold temperatures in Washington that closed Congress.

    According to Kendrick, U.S. regional banks will be the hardest hit by deposit outflows. Citing Bloomberg data, Kendrick showed that regional banks earn more than 60% of their revenue from net interest margin (NIM)—the spread between what they earn from loans and credit cards, and what they pay on deposits.

    “Deposits drive NIM, and they risk leaving banks as a result of stablecoin adoption,” he wrote, per Decrypt. “We find that regional U.S. banks are more exposed on this measure than diversified banks and investment banks, which are least exposed.” Investment banks generate only 20% of their revenue from NIM in Kendrick’s calculations.

    Related: Bankers Renew Their Plea to Close ‘Loophole’ in Stablecoin Law’s Ban on Interest Payments

    All may not be lost for regional banks, however, Kendrick cautions. “If stablecoin issuers hold a large share of their deposits in the banking system where the stablecoins are issued, that should reduce net deposit flight from banks,” he wrote. “The idea is that if a deposit leaves a bank to go into a stablecoin, but the stablecoin issuer holds all of its reserves in bank deposits, there would be no net deposit reduction.”

    Still, stablecoins pose threats to traditional banks on multiple fronts. Kendrick expects the coins to become the “killer app” for global payments that could ultimately cannibalize legacy payment infrastructure. He projects that the total market capitalization of stablecoins, currently hovering around $311 billion, could grow to $2 trillion by the end of the decade. He estimates that nearly a third of that growth will come directly at the expense of traditional bank deposits.