Stablecoin Boom Threatens Bank Profits, Jefferies Warns

Stablecoin deposit runoff is now a genuine line item in Wall Street bank risk analysis. Jefferies analysts published a report on Tuesday warning that stablecoins — while not an overnight threat — could quietly bleed banks of 3% to 5% of core deposits over the next five years, pushing up funding costs and shaving roughly 3% off average bank earnings in what they called a "modest pressure" scenario.

How Bad Could Stablecoin Deposit Runoff Actually Get?

How much could stablecoins hurt bank deposits?

The short answer: bad enough to matter, not bad enough to blow up the system — at least not yet. Jefferies, led by analyst David Chiaverini, framed the threat as slow-moving but persistent. "The intermediate-term risk of gradual deposit runoff from emerging activity-based yield opportunities and payments use cases should not be ignored," the team wrote. That's bank-speak for: this is coming, and the timeline is years not months.

What's driving the concern is simple math. Stablecoin deposit runoff banks projections from Federal Reserve researchers have already flagged that digital dollars can function as parallel checking accounts — moving 24/7, plugging into DeFi protocols that pay yields most bank savings accounts can't touch. Supply hit $305 billion at the end of 2025, up 49% from a year earlier. Adjusted transfer volume reached $11.6 trillion. Jefferies now sees the market hitting $800 billion to $1.15 trillion within five years.

The intermediate-term risk of gradual deposit runoff from emerging activity-based yield opportunities and payments use cases should not be ignored.

The GENIUS Act Gave Banks a Breather — For Now

Here's the thing that's keeping bank CFOs from full panic mode: the GENIUS Act stablecoin regulation, passed in July 2025, explicitly bars regulated stablecoin issuers from paying yield directly to passive holders. That one restriction — closing what Jefferies called the "stablecoin yield loophole" — is doing a lot of heavy lifting right now. Without yield, a stablecoin is basically a digital wallet, not a savings account replacement. Fewer people bolt from their checking account to park money in USDC if USDC can't pay them more than 0.01% APY.

The CLARITY Act, a separate follow-on bill, would further codify stablecoins as payment instruments rather than investment products. But that bill's passage is far from certain. And Jefferies' entire "it's not an immediate threat" thesis rests on that legislative guardrail holding. If the yield loophole ever reopens — through deregulation, regulatory interpretation, or offshore workarounds — all bets are off.

Bank of America CEO Brian Moynihan said earlier this year that $6 trillion in deposits could theoretically migrate into stablecoins and stablecoin-linked products if yield-bearing versions become mainstream. That's not a fringe number. That's the CEO of the second-largest U.S. bank putting a public dollar figure on the downside.

Are Banks Fighting Back or Just Buying Time?

Call it strategic adaptation, or call it banks hedging their bets while the window is still open. Either way, the industry is moving. Fidelity Digital Dollar stablecoin — branded FIDD — became Fidelity's first stablecoin launch, a significant moment for a firm that has historically been conservative on crypto. Moynihan said Bank of America will issue its own stablecoin if Congress gives the green light. Goldman Sachs CEO stated his firm has "an enormous number of people at the firm extremely focused on tokenization, stablecoins."

That's a lot of corporate stablecoin enthusiasm from institutions that, not long ago, were treating crypto as a compliance problem. The cynic's read: they're not pivoting because they believe in Web3 — they're pivoting because they've modeled what happens if they don't. Losing even 3% to 5% of core deposits at scale is billions of dollars in funding capacity gone. You don't wait for that to happen before building your own on-ramp.

Which Banks Are Most Exposed?

Not all banks face equal risk here. Custody banks and large institutions already investing in digital asset infrastructure have natural hedges. The vulnerable ones, according to Jefferies, are the smaller regional lenders sitting on fat concentrations of retail and interest-bearing deposits — precisely the accounts that would jump ship first for a yield-paying digital dollar.

Jefferies specifically named WTFC (Wintrust Financial), FLG, WBS (Webster Financial), EGBN, and AX (Axos Financial) as the most exposed banks under their coverage. These aren't household names in the way JPMorgan is, but they hold real money for real depositors — and those depositors are exactly the audience stablecoin payment apps are chasing.

The broader argument Jefferies makes — and it's worth sitting with — is that the threat isn't a bank run. It's a slow drip. DeFi staking rewards, transaction-based yield on stablecoin payments, settlement incentives: each one pulls a little more idle cash out of checking accounts and into on-chain rails. Add it up over five years and the 3% earnings hit starts to look less like a warning and more like a floor.