The regulatory bottleneck in Washington masks a trillion-dollar threat to America’s banking core. The rise of stablecoins is extending beyond emerging markets and becoming a direct threat to national balance sheets, investment bank Standard Chartered said in a report released Tuesday.
The main risk for US lenders is net interest margin (NIM) erosion, according to Geoff Kendrick, head of digital assets research at Standard Chartered. He identified NIM as the most critical vulnerability because it is caused by the very deposits that are now attracted to digital assets.
NIM is a key indicator of bank profitability that tracks the gap between interest earned on assets and interest paid to depositors.
The bank’s analysis shows that regional U.S. banks are significantly more exposed than diversified giants or investment firms. As regions rely more on interest income, the loss of sticky retail deposits to stablecoins hits their bottom line harder.
“We find that U.S. regional banks are more exposed to this measure than diversified banks and investment banks, which are the least exposed,” Kendrick wrote.
Often serving as the primary payment rails and cross-border settlement tools of the crypto economy, stablecoins are digital assets tied to stable reserves like fiat or gold. The sector is dominated by Tether’s USDT, followed by Circle’s USDC.
Tether is entering the U.S. domestic market with USAT, a dollar-backed token issued by Anchorage Digital Bank, the company announced Tuesday.
Standard Chartered’s analysis modeled a bleak outlook for traditional deposit retention. While issuers could theoretically mitigate this problem by holding reserves in the banks they disrupt, industry leaders Tether and Circle (CRCL) hold only 0.02% and 14.5% of their reserves in bank deposits, respectively.
With a projected stable market capitalization of $2 trillion by 2028, the bank estimates $500 billion will leave 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 yield: The latest draft prohibits stablecoin issuers from paying interest, a provision supported by big banks, but crypto executives like Coinbase (COIN) warn it could stifle the industry. Despite the current impasse, Standard Chartered expects the bill to be passed by the end of the first quarter of 2026.
Learn more: Stablecoins and self-custody are driving the rise of crypto neobanks
