Crypto: Stablecoins Are Real Threat To Bank Deposits, Says Standard Chartered

Stablecoin growth could drain bank deposits, with regional US banks most exposed, Standard Chartered’s Geoff Kendrick warned.

Stablecoins pose a real risk to bank deposits both globally and in the United States, according to a new report by Standard Chartered analysts.

The delay of the US CLARITY Act — a bill proposing to prohibit interest on stablecoin holdings — is a “reminder that stablecoins pose a risk to banks,” Geoff Kendrick, global head of digital assets research at Standard Chartered, said in a report on Tuesday seen by Cointelegraph.

“We estimate that US bank deposits will decrease by one-third of stablecoin market cap,” the analyst said, referring to a $301.4 billion market of US dollar-pegged stablecoins, as measured by CoinGecko.

Standard Chartered’s findings add to the CLARITY Act debate amid companies like Coinbase withdrawing support, and Circle CEO Jeremy Allaire dismissing fears of stablecoin-driven bank runs as “totally absurd.”

In the report, Kendrick highlighted net interest margin (NIM) income — a key profitability metric that measures the difference between interest earned and interest paid, divided by average interest-earning assets.

“NIM income as a percentage of total bank revenue is the most accurate measure of this risk because deposits drive NIM, and they risk leaving banks as a result of stablecoin adoption,” Kendrick said.

“We find that regional US banks are more exposed on this measure than diversified banks and investment banks, which are least exposed,” he added, citing Huntington Bancshares, M&T Bank, Truist Financial and CFG Bank as the most exposed.

The amount of US bank deposits at risk from stablecoin adoption depends on a number of factors, including the location of issuer’s deposits, domestic versus foreign demand and wholesale versus retail demand, the analyst noted.

If stablecoin issuers hold a large share of their deposits in the banking system where the stablecoins are issued, the pressure for bank runs should be reduced, Kendrick wrote, adding:

Source: CoinTelegraph