TLDR
- Jefferies projects that stablecoin adoption may lead to a 3%–5% decline in traditional bank deposits within five years
- Bank profitability could decrease by approximately 3% due to increased funding expenses
- Stablecoin market capitalization reached $314 billion and may surge to $1.15 trillion over the next five years
- GENIUS Act regulations prevent stablecoin issuers from offering yields to passive users, slowing immediate deposit migration
- Regional banks including Wintrust Financial and Webster Financial face heightened vulnerability
The stablecoin sector is experiencing rapid expansion. Current market capitalization stands at approximately $314 billion, representing substantial growth from roughly $184 billion recorded in 2022.
According to a recent analysis from Jefferies, this expansion trajectory poses a subtle but significant threat to conventional banking profitability. The research suggests that financial institutions may witness 3% to 5% of their core deposit base migrate elsewhere during the next half-decade.
This erosion of deposits would compel banks to pursue costlier funding alternatives. Research team members under David Chiaverini’s leadership predict that typical banking institutions could experience approximately 3% earnings contraction.
“The intermediate-term risk of gradual deposit runoff from emerging activity-based yield opportunities and payments use cases should not be ignored,” the analysts wrote.
Stablecoins represent digital currencies designed to maintain value parity with traditional fiat money such as the U.S. dollar. These assets have become essential infrastructure for cryptocurrency markets and are increasingly utilized for payment processing, corporate treasury functions, and international money transfers.
Transaction volume for stablecoins reached $11.6 trillion throughout 2025. Outstanding supply climbed to $305 billion by year-end 2025, marking a 49% annual increase.
Jefferies forecasts indicate the stablecoin ecosystem could balloon to between $800 billion and $1.15 trillion over the coming five-year period.
Why Banks Are Paying Attention
Bank of America CEO Brian Moynihan warned earlier this year that the banking system could be hurt by the “possibility of $6 trillion in deposits” moving into stablecoins and stablecoin-linked products.
Stablecoins operate continuously without time restrictions and integrate seamlessly with decentralized finance ecosystems that frequently deliver returns exceeding traditional bank deposit rates. This functionality appeals strongly to consumers seeking enhanced returns on their capital.
However, recent U.S. regulatory frameworks have dampened some immediate concerns. The GENIUS Act, which became law in July 2025, prohibits licensed stablecoin providers from distributing yield payments directly to passive token holders.
This regulatory constraint moderates the pace at which funds might transfer from conventional checking and savings products into digital currency alternatives.
Banks Are Moving to Compete
Several prominent financial enterprises are taking proactive steps. Fidelity Investments introduced its proprietary stablecoin product, the Fidelity Digital Dollar.
Bank of America’s Moynihan indicated the institution plans to launch a stablecoin once Congressional authorization is secured. Goldman Sachs CEO revealed substantial internal resources dedicated to tokenization initiatives and stablecoin development.
Jefferies’ analysis indicates that banking institutions with elevated concentrations of retail deposits and interest-bearing accounts face greater vulnerability compared to larger institutions already building digital asset capabilities.
The analysis specifically identifies Wintrust Financial, Flagstar Financial, Webster Financial, Eagle Bancorp, and Axos Financial as the banks under coverage with the highest exposure levels.
The Jefferies report was published on Tuesday, March 10, 2026.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
