The regulatory bottleneck in Washington is masking a trillion-dollar threat to the American banking core. The rise of stablecoins is moving beyond emerging markets to become a direct threat to national balance sheets, investment bank Standard Chartered said in a report on Tuesday.
The main risk for US lenders is net interest margin (NIM) erosion, according to Geoff Kendrick, head of digital asset research at Standard Chartered. He identified NIM as the most critical vulnerability because it is driven by the same deposits that are now attracted to digital assets.
The NIM is a fundamental indicator 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 regions rely more on interest income, the loss of retail fixed deposits to stablecoins impacts their bottom line more.
“We find that US regional banks are more exposed to this measure than diversified banks and investment banks, which are less exposed,” Kendrick wrote.
Stablecoins, which often serve as the crypto economy’s primary payment gateways and cross-border settlement tools, are digital assets pegged to stable reserves such as fiat money or gold. The sector is dominated by Tether’s USDT, followed by Circle’s USDC.
Tether is entering the US domestic market with USAT, a dollar-backed token issued by Anchorage Digital Bank, the company said Tuesday.
Standard Chartered’s analysis modeled a bleak outlook for traditional deposit retention. While issuers could theoretically mitigate this by holding reserves at disruptive banks, industry leaders Tether and Circle (CRCL) hold just 0.02% and 14.5% of their reserves in bank deposits, respectively.
With a projected stablecoin market capitalization of $2 trillion by 2028, the bank estimated that $500 billion will flow out of developed market banks over the next three years.
The catalyst for this change is market structure legislation, currently stalled in the Senate. The friction centers on performance: The latest draft prohibits stablecoin issuers from paying interest, a provision that big banks support but that crypto leaders like Coinbase (COIN) warn could suffocate the industry. Despite the current impasse, Standard Chartered anticipates the bill will be passed by the end of the first quarter of 2026.
Read more: Stablecoins and self-custody are fueling the rise of crypto neobanks
