There is an ongoing war between crypto companies and traditional banks over stablecoins, and analysts at Jefferies said they could become a constant drag on banks’ profits as use of the digital dollar spreads.
Even though stablecoins do not pose an immediate existential threat to banks and are unlikely to trigger a sudden run on U.S. bank deposits, Jefferies analysts estimate that banks could experience a 3% to 5% runoff of core deposits over the next five years. This would likely increase funding costs and reduce bank profitability.
“The medium-term risk of a gradual withdrawal of deposits due to new activity-based yield opportunities and payments use cases should not be ignored,” analysts led by David Chiaverini wrote in a report on Tuesday.
This “modest pressure” scenario would leave the average bank facing a drop of around 3% in profits, analysts estimate.
It’s not hard to see why banks should be concerned about the growth of stablecoins, which are cryptocurrencies designed to maintain a stable value and are typically pegged 1:1 to fiat currencies like the US dollar or euro.
They are already widely used in cryptocurrency trading, but since the passage of the GENIUS Act last year in the United States, the market is expanding to payments, cash management and cross-border transfers. Supply reached $305 billion by the end of 2025, up 49% from the previous year, while the adjusted volume of stablecoin transfers reached $11.6 trillion in 2025, according to the report.
The total market capitalization of the stablecoin sector currently stands at around $314 billion, up from around $184 billion in 2022, according to data from DefiLlama. And according to Jefferies’ calculations, this could reach between $800 billion and $1.15 trillion over the next five years.
This growth is important for banks because stablecoins can serve as a digital currency circulating 24 hours a day and connecting to decentralized finance platforms that offer higher yields than most bank accounts.
In fact, Bank of America CEO Brian Moynihan warned earlier this year that the banking system as a whole could be affected by the “possibility of $6 trillion in deposits” moving to stablecoins and stablecoin-related products offering similar returns.
The long-term threat
Jefferies’ main argument that stablecoins do not pose an immediate threat is that the new Market Structure Bill in the US rules, in its current form, limits their appeal as simple savings products, although the passage of the bill is uncertain.
“CLARITY [act] would codify stablecoins as payment instruments, rather than savings products, filling the “stablecoin yield gap” left open in GENIUS.
The GENIUS Act, passed in July 2025, prohibits stablecoin issuers from paying a return directly to passive holders. This restriction reduces the risk of a short-term abrupt change in checking and savings accounts.
Additionally, banks and other traditional financial giants are launching or considering their own stablecoins to get ahead of the competition. Fidelity Investments has launched its first stablecoin, the Fidelity Digital Dollar (FIDD). Bank of America’s Moynihan said the bank would issue a stablecoin if Congress legalized it, and Goldman’s CEO said his bank had “an enormous number of people within the company extremely focused on tokenization and stablecoins.”
The report nevertheless states that the long-term risk should not be ignored.
“We see the potential for activity-based rewards for stablecoin transactions, payments and settlements, as well as rewards from DeFi staking and lending protocols, which carry similar risk to bank deposits.”
So, which banks are most exposed to this risk?
According to Jefferies, banks with larger concentrations of retail and interest-bearing deposits appear more exposed than custodian banks or large institutions already investing in digital asset infrastructure.
“We view WTFC, FLG, WBS, EGBN and AX as the most exposed covered banks, given that they have the highest concentration of retail and interest-bearing deposits.”
Read more: Stablecoin Market Hits $312 Billion as Banks, Card Networks Adopt On-Chain Dollars
