• Standard Chartered's Geoffrey Kendrick says about $500 billion could migrate from US banks to stablecoins by 2028.
• Kendrick estimates regional banks will be the most affected, as net interest margin is a core driver of their revenue.
• The report follows deliberations on the CLARITY Act concerning whether third-party stablecoin providers can pay yield to customers.

US banks face a serious threat as stablecoins could attract $500 billion in deposits from traditional banks by the end of 2028, according to a Tuesday report from Standard Chartered analysts.

Regional banks risk losing deposits to stablecoins

Geoffrey Kendrick, Standard Chartered's Global Head of Digital Assets Research, emphasized the growing influence of these dollar-pegged tokens on traditional banking operations. "The tail is starting to wag the dog," he noted, highlighting how stablecoins are beginning to reshape core banking functions like payments and deposits.

Regional banks appear most vulnerable to this transition. Kendrick's analysis focuses on net interest margin (NIM) income — the difference between what banks earn on loans versus what they pay on deposits — as a key risk indicator. Since regional banks rely on NIM for over 60% of their revenue, any significant deposit outflows could directly impact their earnings.

"I try to determine which banks are relatively more/less exposed to this risk […] regional banks are most exposed," wrote Kendrick. In contrast, diversified and investment banks face less risk due to their broader revenue streams, with NIM accounting for less than 20% of their total revenue.

The projection is a more conservative estimate than his October forecast, which predicted $1 trillion in deposit outflows primarily from emerging markets. However, Kendrick stressed that the threat has expanded beyond developing economies to include developed markets like the United States.

One potential mitigating factor involves where stablecoin issuers store their reserves. "If stablecoin issuers hold a large share of their deposits in the banking system where the stablecoins are issued, that should reduce net deposit flight from banks," Kendrick noted. However, the two largest issuers, Tether and Circle, hold most reserves in US Treasuries rather than bank deposits.

The prediction comes amid regulatory uncertainty surrounding the CLARITY Act. Lawmakers are deliberating whether to allow third-party providers to offer yield on stablecoins, potentially accelerating the shift away from traditional banking.

Last week, Circle CEO Jeremy Allaire noted in an interview that stablecoins are not in competition with banks and payment firms but rather play a complementary role.