Standard Chartered Says Stablecoins Could Threaten Regional Banks

The rise of stablecoins could pose a grave threat to America’s regional banks.

That’s according to a new analysis from investment bank Standard Chartered, cited in a report Tuesday (Jan. 27) from CoinDesk.

The chief risk for banks is the deterioration of net margin interest (NIM), as it is driven by the deposits being pulled into digital assets, said Geoff Kendrick, head of digital assets research at Standard Chartered.

The report noted that NIM is a key metric of profitability for banks, measuring the interest earned on assets against interest paid out to depositors.

According to the report, the analysis finds that regional banks in the U.S. are far more exposed than larger lenders or investment firms, as they depend more heavily on interest income.

The bank calculated that around $500 billion will flow out of developed market banks in the next three years, assuming a projected stablecoin market cap of $2 trillion by 2028.

Driving this shift is new market structure legislation, currently on hold in the Senate. One of the issues causing friction is a bar on stablecoin issuers from paying interest. Big banks support the prohibition, while crypto companies say it could hurt their industry. While the bill is jammed now, Standard Charter still suspects it will pass by late in the first quarter.

As CoinDesk noted, stablecoins are digital assets pegged to stable reserves like the U.S. dollar, and typically serve as the chief payment rail and cross-border settlement tool for the crypto space. The industry is led by Tether’s USDT token, with Circle’s USDC in the No. 2  spot.

The report came the same day that Tether announced the launch of USAT, a dollar-backed coin issued by Anchorage Digital Bank. The new token was to operate within the federal stablecoin framework established by the GENIUS Act, PYMNTS reported.

Writing about the stablecoin market earlier this month, PYMNTS contended that if stablecoins can only move value within the crypto space, they will likely remain a niche financial instrument.

“But if they can move seamlessly into bank accounts and everyday commerce, they may become something far more consequential: a new layer of global money movement,” that report said. “Citi Institute’s Future of Finance think tank, for example, has projected that the stablecoin market could jump to at least $1.6 trillion by 2030, assuming regulatory support and institutional integration continue apace.”