Stablecoins can make banks compete harder for deposits, raising the rates they pay and potentially changing loan pricing or lending. But a stablecoin purchase does not automatically remove the same amount of deposits from the banking system: the result depends on what the issuer holds in reserve, how payments settle, and where the money goes next.
How money moves when someone buys a stablecoin
A customer pays for a stablecoin, and its issuer receives the funds and acquires reserve assets. The customer has exchanged a bank deposit for a digital token, but the issuer’s next step determines whether funds leave a bank, move to another bank, or enter a different part of the financial system. Later payments can move deposits and settlement balances again.
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That distinction separates a change in who holds deposits from a change in the total amount of bank deposits. Retail balances may decline at one bank while a stablecoin issuer builds a large account at another. The banking system’s aggregate deposits may therefore change less than the customer’s bank balance suggests—or not in a predictable one-for-one way.
How reserve choices change the effect on banks
| Issuer’s reserve asset | Likely immediate funding effect | What determines the broader effect |
|---|---|---|
| Bank deposits | Funds may shift from customers’ retail accounts into an issuer’s bank account. Deposits can remain in the banking system but become concentrated. | Which banks receive the issuer’s balances, whether those balances are stable, and how the lost retail funding is distributed. The BIS Annual Economic Report 2026 describes this as a possible shift in the composition and stability of bank funding. |
| Treasury bills | The issuer’s purchase transfers funds to the seller or, for a new issue, to the government. It does not by itself establish a lasting, system-wide deposit drain. | Sellers may redeposit proceeds, and government spending can send funds back into private accounts. The amount and timing of that recycling depend on the transaction chain, as discussed in the Federal Reserve’s December 2025 note and the BIS’s 2026 analysis. |
| Central-bank reserves | Depending on the rules and access arrangements, reserve backing can shift settlement balances away from commercial-bank funding. | The scale of any lending effect depends on reserve requirements, the monetary-policy framework, bank responses, and stablecoin adoption. The BIS’s 2026 analysis treats outcomes as conditional on these assumptions rather than as a fixed forecast. |
These are distinct scenarios, not interchangeable descriptions of a single stablecoin design. Reserve composition, the seller of any asset, and where sale proceeds are deposited all affect the path from a token purchase to bank funding.
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Why deposit composition can matter as much as the total
Retail deposits are spread across many customers. A large issuer or custodian balance can be concentrated and may respond more quickly to changes in rates or market conditions. If banks replace lost retail funding with such wholesale balances, total deposits may look little changed even as the source and stability of funding worsen. The BIS identifies this composition shift as a potential liquidity concern.
The distribution across banks also matters. Some banks may receive stablecoin-related balances while others lose customers’ deposits. The BIS notes that smaller banks could be more exposed if stablecoin growth draws funding from them, with possible consequences for small and medium-sized firms that depend on those lenders. This is a conditional concern, not evidence that all smaller banks or SME borrowers will be affected in the same way.
How funding pressure can affect deposit rates and loans
If customers can move money from bank accounts into stablecoins, banks may need to offer more attractive deposit rates to keep or replace that funding. The Bank for International Settlements’ Annual Economic Report 2026 says: “Rising competition for funding from stablecoins would generally imply rising pressure on banks to raise deposit rates, increasing banks’ funding costs.”
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A December 2025 Federal Reserve note reports that banking literature it cites finds more than 60% pass-through from deposit funding costs into lending rates. That is evidence from broader banking research, not a stablecoin-specific estimate. The same note reports a 0.6–1.26 range for a deposit-funding multiplier based on cited estimates; this also is not a direct measure of stablecoins’ effect.
What the available evidence does—and does not—show
Observed bank-level evidence
New York Fed Staff Report No. 1185, “Stablecoin Disintermediation,” by Michael Junho Lee and Donny Tou (February 2026), combines a theoretical account with transaction-level data connecting on-chain transactions and wholesale interbank payments. In the study’s setting, the authors find that stablecoin activity can transmit liquidity shocks to banks and that partner banks’ loan share of assets contracts relative to peers. This is an observed relative outcome among the banks studied, not a universal projection or an estimate that every stablecoin purchase causes a particular loan reduction.
A modeled policy counterfactual
The Council of Economic Advisers’ White House FAQ, “Effects of Stablecoin Yield Prohibition on Bank Lending” (September 15, 2026), reports a model estimate of $2.1 billion in additional bank lending if stablecoin yield were prohibited. Its baseline assumes roughly $300 billion in stablecoins, equal to about 1.7% of bank deposits; the reported lending change is 0.02% of bank loans. These are outputs of a calibrated model for a specific policy counterfactual, not measured effects of stablecoin adoption or a general forecast of how much lending will change.
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BIS Working Paper 1363, “The macroeconomics of stablecoins,” by Boris Hofmann, Matthias Kaldorf, and Matthias Rottner (June 23, 2026), models both a bank-lending channel and a countervailing fiscal-space channel. Demand for Treasury bills as stablecoin reserves can affect government financing conditions, while bank-funding effects can influence credit. Their relative strength depends on assumptions including reserve rules, public debt, and foreign demand; the paper’s quantitative projections are model-dependent.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.Why estimates differ—and what to watch
There is no single causal estimate that applies across stablecoin designs, reserve mixes, adoption levels, and bank types. Transaction-level findings, broader banking research, and calibrated policy models answer different questions and should not be treated as equivalent evidence.
- Reserve rules: whether backing consists of bank deposits, Treasury bills, central-bank reserves, or a mix changes which institutions hold the funds.
- Funding distribution: a bank losing many retail accounts may face different pressures from one gaining a large issuer balance.
- Market and policy conditions: deposit-rate competition, stablecoin yield, liquidity constraints, and monetary-policy arrangements shape banks’ responses.
- Time horizon: transition-related liquidity pressure, longer-term loan pricing, borrower-level effects, and fiscal effects need not occur at the same time or in the same direction.
For borrowers, the practical implication is conditional: stablecoin growth could raise funding costs and affect credit availability at banks that lose stable funding, while other banks may gain balances. Whether that changes a particular borrower’s rate or access to credit depends on the borrower’s lender and the broader funding environment—not simply on the total value of stablecoins outstanding.
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