Standard Chartered Bank warns that growing stablecoin adoption could cost U.S. banks $500 billion in deposits by 2028, posing a structural risk. Galaxy Digital’s head of research, Alex Thorn, counters this view, arguing deposits will migrate rather than flee, comparing the flow to money market funds.
Crypto leaders are challenging concerns that stablecoin growth threatens traditional banks. A recent report from Standard Chartered Bank projected U.S. banks could lose $500 billion in deposit outflows by 2028 due to this shift. The bank’s head of digital asset research, Geoffrey Kendrick, stated the risk has become more apparent as payments migrate to on-chain alternatives.
Kendrick previously estimated stablecoins could attract $1 trillion from emerging markets in the same period. Standard Chartered also estimated the overall stablecoin market could grow to $2 trillion by 2028. Currently, the stablecoin market capitalization exceeds $300 billion.
Galaxy Digital‘s head of research, Alex Thorn, dismissed the projection of deposit flight. “There is no such thing as deposit flight,” Thorn said. He compared the process to money moving from savings accounts into money market funds, which then buy treasury bonds.
Thorn reframed the dynamic as a deposit migration rather than a flight. “There could be some ‘deposit migration,’ if there are banks that do not offer competitive enough services,” he stated. Banks heavily reliant on deposit-funded lending face the highest risk, according to Kendrick’s analysis.
The report indicated regional banks with high dependence on interest income are most exposed. Diversified and investment banks showed moderate to low risk from stablecoin adoption. These tensions over stablecoin yields have simmered behind ongoing legislative discussions.
The White House has instructed parties to reach a compromise to advance a crypto market structure bill. Public progress on this issue has not yet been made as of the latest reporting.
