The regulatory bottleneck in Washington masks a trillion-dollar threat to America’s banking core. The rise of stablecoins is moving beyond emerging markets to become a direct threat to domestic balance sheets, investment bank Standard Chartered said in a Tuesday report.
The primary risk for US lenders is the erosion of the net interest margin (NIM), according to Geoff Kendrick, head of digital assets research at Standard Chartered. He identified NIM as the most critical vulnerability because it is fueled by the very deposits that are now being lured away by digital assets.
NIM is a critical measure of bank profitability that tracks the spread between interest earned on assets and interest paid to depositors.
The bank’s analysis shows that US regional banks are significantly more exposed than diversified giants or investment firms. Because regional regions are more dependent on interest income, the loss of sticky retail deposits to stablecoins hits their bottom line harder.
“We find that regional US banks are more exposed to this measure than diversified banks and investment banks, which are the least exposed,” Kendrick wrote.
Often serving as the cryptoeconomy’s primary payment rails and cross-border settlement tools, stablecoins are digital assets linked to stable reserves such as fiat or gold. The sector is dominated by Tethers USDT, followed by Circles USDC.
Tether is entering the US domestic market with USAT, a dollar-backed token issued by Anchorage Digital Bank, the company said on Tuesday.
Standard Chartered’s analysis modeled a bleak outlook for traditional deposit holdings. While issuers could theoretically mitigate this by holding reserves in the banks they disrupt, industry leaders Tether and Circle ( CRCL ) only hold 0.02% and 14.5% of their reserves in bank deposits, respectively.
With an expected stablecoin market cap of $2 trillion by 2028, the bank estimated that $500 billion will leave developed market banks over the next three years.
The catalyst for this shift is market structure legislation, which is currently stalled in the Senate. The friction centers on dividends: the latest draft bans stablecoin issuers from paying interest, a provision that major banks support but crypto leaders like Coinbase ( COIN ) warn could stifle the industry. Despite the current impasse, Standard Chartered expects the bill to be passed by the end of January 1. quarter 2026.
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