Jefferies Analysts Warn Stablecoin Boom Could Erode Traditional Bank Profits
Stablecoins, which maintain a stable value through backing by assets such as the U.S. dollar, are gradually expanding into money transfers, settlement and cross-border payments. Jefferies said traditional banks could lose some of the low-cost core deposits they rely on for lending if businesses and consumers move funds from bank accounts into digital dollars. That would put pressure on net interest margins and profitability.
A recent Jefferies report estimated that continued adoption of stablecoins and digital dollars could drain 3%–5% of U.S. banks’ core deposits over the next five years and reduce average bank earnings by about 3%. Analysts recommended that banks accelerate the development of their own tokenized payment solutions to retain deposits, payment flows and related fee income.
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The history behind this eventStablecoin Regulatory Uncertainty Could Put Traditional Banks at a Greater Disadvantage Than Crypto Firms
The United States has yet to clearly define whether stablecoins are deposits, securities or standalone payment instruments, making it difficult for banks to fully commercialize their digital-asset investments. JPMorgan has built the Onyx payments network, BNY Mellon has launched digital-asset custody services, and Citigroup has tested tokenized deposits, but compliance risks have constrained those initiatives.
On March 15, 2026, Mega Matrix Capital Markets Executive Vice President Colin Butler said crypto platforms offer yields of 4%–5% on stablecoin balances, compared with less than 0.5% for the average U.S. savings account. Sygnum Chief Investment Officer Fabian Dori said a large-scale deposit exodus was unlikely in the short term, though corporate and fintech clients could be the first to move funds.
NY Fed Study Finds Banks Holding Stablecoin Deposits Are Lending Less
Stablecoin issuers rely on banks to process minting and redemptions, and rapid fund flows can intensify intraday payment and liquidity pressures at partner banks. After Silicon Valley Bank and other crypto-friendly lenders collapsed in March 2023, issuers switched banking partners, creating an observable natural experiment. If banks hold more reserves to meet redemptions, they have fewer assets available for lending to businesses and households, with implications for credit supply and financial stability.
The Federal Reserve Bank of New York published Staff Report No. 1185 in February 2026, tracking the performance of new partner banks after an adjustment period from March through June 2023. The study found that their daily interbank payments increased by about $658 million compared with the control group, 67% above pre-partnership levels, while average assets rose by more than $2 billion. Reserves as a share of assets increased by 9.5 percentage points, while the loan share fell by a relative 13.8 percentage points.
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