TLDR
- Financial firm Jefferies projects a potential 3%–5% reduction in traditional bank deposits over the next five years due to stablecoin adoption
- Banking sector earnings could decline approximately 3% as institutions face higher funding costs
- Stablecoin market capitalization reached $314 billion with projections suggesting growth to $1.15 trillion within five years
- Recent GENIUS Act legislation prohibits stablecoin providers from offering yield to passive users, slowing immediate deposit migration
- Regional banks including Wintrust Financial and Webster Financial identified as having highest vulnerability
The stablecoin sector continues its upward trajectory. Market capitalization for digital assets pegged to traditional currencies currently stands at approximately $314 billion, representing significant expansion from the $184 billion recorded in 2022.
According to financial analysts at Jefferies, this expansion presents a gradual but meaningful challenge to conventional banking institutions. A recent analytical report suggests traditional banks may experience a reduction of 3% to 5% in their core deposit base throughout the coming five-year period.
This anticipated deposit migration would force banking institutions to pursue alternative, more costly funding sources. Research conducted by analyst David Chiaverini and colleagues indicates average earnings per bank could contract by approximately 3%.
“The intermediate-term risk of gradual deposit runoff from emerging activity-based yield opportunities and payments use cases should not be ignored,” the analysts wrote.
Stablecoins represent digital currencies designed to maintain value parity with traditional fiat money such as the U.S. dollar. These instruments have become essential in cryptocurrency markets and are increasingly utilized for payment processing, corporate treasury functions, and international money transfers.
Transaction volume for stablecoins climbed to $11.6 trillion during 2025. Total outstanding supply reached $305 billion by year-end 2025, marking a 49% annual increase.
Jefferies’ forward-looking analysis suggests the stablecoin ecosystem could expand to between $800 billion and $1.15 trillion over the next half-decade.
Why Banks Are Paying Attention
Bank of America CEO Brian Moynihan warned earlier this year that the banking system could be hurt by the “possibility of $6 trillion in deposits” moving into stablecoins and stablecoin-linked products.
Stablecoins operate continuously without banking hours restrictions and integrate with decentralized financial platforms offering returns that typically exceed traditional savings account rates. This functionality creates compelling value propositions for consumers seeking enhanced returns on idle capital.
However, recent American regulatory frameworks have tempered immediate threats. The GENIUS Act, which became law in July 2025, explicitly prevents authorized stablecoin issuers from distributing yield payments to passive token holders.
This regulatory constraint moderates the speed at which customer deposits might transfer from conventional checking and savings products into stablecoin alternatives.
Banks Are Moving to Compete
Several prominent financial institutions are proactively responding to this shift. Fidelity Investments has introduced its proprietary stablecoin product, the Fidelity Digital Dollar.
Bank of America’s Moynihan indicated his institution would launch a stablecoin offering contingent upon Congressional authorization. Goldman Sachs’ chief executive revealed substantial internal resources dedicated to tokenization initiatives and stablecoin development.
According to Jefferies’ analysis, banking institutions maintaining higher concentrations of retail customer deposits and interest-bearing accounts face greater vulnerability compared to larger institutions that have already committed resources to digital asset infrastructure development.
The research specifically identifies Wintrust Financial, Flagstar Financial, Webster Financial, Eagle Bancorp, and Axos Financial as the institutions with greatest exposure among those analyzed.
The Jefferies report was published on Tuesday, March 10, 2026.
