Standard Chartered Warns Stablecoins Could Divert Rs. 41 Lakh Crore from U.S. Bank Deposits by 2028

Standard Chartered has issued a stark warning that the rapid adoption of dollar-pegged stablecoins could siphon off up to Rs. 41 lakh crore (about $500 billion) in deposits from U.S. banks by the end of 2028, puncturing the traditional deposit base that underpins lending and net interest income. The bank’s analysis highlights regional lenders as particularly exposed due to their reliance on deposit funding, while larger institutions with diversified revenue streams may better withstand the shift. Regulatory uncertainty and reserve distribution practices by major stablecoin issuers are central to the projected deposit migration, underscoring tensions between digital-asset growth and traditional banking stability.

Stablecoins and Traditional Banking: A Structural Shift
Stablecoins—digital tokens pegged to fiat currencies—have grown rapidly in market acceptance and usage, particularly for cross-border payments, trading, and liquidity settlement. Standard Chartered’s analysis projects that as stablecoin supply expands toward an estimated $2 trillion by 2028, a substantial portion of capital could move out of conventional bank deposits into these digital instruments.

Unlike conventional deposits that fuel loan portfolios and generate net interest margin (the spread between lending and deposit rates), stablecoins offer instant settlement and seamless digital interoperability. As a result, they may attract funds that would otherwise remain in bank accounts, particularly when yields or convenience factors favor digital alternatives.

Regional Banks Most at Risk
Standard Chartered’s report specifically identifies U.S. regional banks as the most vulnerable to deposit migration. These institutions typically rely more heavily on deposit-driven revenue compared with larger, diversified banks or investment firms. Declining deposits can directly erode their net interest margin, challenging profitability and lending capacity.

Major stablecoin issuers such as Tether (USDT) and Circle (USDC) maintain a relatively small percentage of their reserves in traditional bank deposits, instead allocating the bulk to U.S. Treasuries and other liquid instruments. This practice limits the likelihood that funds flowing into stablecoins will cycle back into the banking system, reinforcing one-way capital movement away from deposit accounts.

Regulatory Uncertainty and Competitive Dynamics
The evolving legislative landscape in the United States plays a significant role in shaping the stablecoin outlook. A federal framework enacted last year created baseline rules for stablecoin issuance, including prohibitions on interest payments by issuers. However, a loophole remains that could allow third parties—such as crypto exchanges—to offer yield on stablecoins, effectively competing with traditional deposit products.

Banking lobbyists argue that without legislative clarification, deposit outflows could intensify, undermining financial stability. Conversely, digital-asset proponents contend that restrictions on yield offerings would be anti-competitive and limit innovation. A Senate Banking Committee hearing on crypto legislation was recently delayed amid disagreements over how to address these concerns.

Broader Implications for Financial Markets
The potential reallocation of Rs. 41 lakh crore away from bank deposits could lead to sustained adjustments in banking operations, reserve management, and funding models. For regional banks, in particular, sustained deposit reductions may necessitate strategic shifts toward non-deposit funding sources or digital integrations to remain competitive.

At the same time, the expansion of stablecoin usage underscores the ongoing convergence of traditional finance and digital assets, with implications for payment infrastructure, liquidity dynamics, and global financial linkages. Well-managed regulatory frameworks and transparent reserve practices may help balance innovation with systemic stability as markets adapt to this structural evolution.

Toward a New Banking-Crypto Equilibrium
Standard Chartered’s projection signals that the banking sector could face significant strategic challenges if stablecoins continue their adoption trajectory. Whether this trend represents a threat to financial stability or an opportunity for innovative integration depends on how regulators, banks, and digital-asset firms navigate the interplay between emerging technologies and foundational financial intermediaries.