[Bitcoin Now] Are Stablecoins Becoming a Black Hole for Bank Deposits?

Standard Chartered Report
Stablecoin Market Projected to Reach $2 Trillion by 2028
Potential Shift of $500 Billion in Bank Deposits

There are projections that if the adoption of stablecoins expands, up to $500 billion (716 trillion won) in deposits could leave advanced economy banks by 2028.

According to foreign media including Bloomberg and Reuters on the 27th (local time), Geoff Kendrick, Head of Digital Assets at Standard Chartered, expressed concerns that if the stablecoin market grows to $2 trillion by 2028, up to $500 billion in deposits could disappear from banks in advanced economies alone.

According to DeFiLlama, a decentralized finance (DeFi) data platform, the global market capitalization of stablecoins as of the 27th is about $308 billion. This marks an increase of approximately 42% compared to about $217 billion on January 25 last year. When comparing the potential scale of deposit outflows presented in the report to the total deposits in the United States, it is estimated to be around 2.5%. As of last year, the total deposits in all U.S. commercial banks amounted to about $18.7 trillion.

Kendrick believes that legislation related to virtual assets could serve as a catalyst for the growth of cryptocurrency companies such as Coinbase. Currently, the so-called "Clarity Act," which aims to regulate the structure of the virtual asset market, is under discussion in the U.S. Congress. He predicted that if this bill passes, the growth rate of the stablecoin market will accelerate even further.

In the report, Kendrick pointed out that as payment networks and other core banking operations migrate to stablecoins, U.S. banks are facing yet another threat.

However, the key issue is whether virtual asset exchanges can offer consumers rewards similar to deposit interest on stablecoin balances. Coinbase currently provides an annual reward of about 3.5% on USDC stablecoin balances for subscribers of its paid membership, "Coinbase One." In contrast, the general deposit interest rate at major U.S. banks typically hovers around 1% or less.

Currently, the Clarity Act prohibits paying interest directly on stablecoins. However, the banking sector argues that there are regulatory loopholes allowing third parties such as exchanges to provide similar returns. They also warn that if such structures are effectively allowed to offer products similar to deposits outside the scope of regulation, it could result in deposit outflows from banks and undermine financial stability.

On the other hand, the virtual asset industry is strongly opposing these claims. Brian Armstrong, CEO of Coinbase, recently stated at the World Economic Forum (WEF) in Davos, Switzerland, "Bank lobby groups and banking associations are trying to ban competitors," adding, "This is un-American and harms consumers."

Although discussions on the Clarity Act have been delayed due to clashes between the virtual asset industry and the banking sector, Kendrick predicted that the bill is highly likely to pass by the end of the first quarter of this year.

Kendrick also explained that the total amount of bank deposits at risk due to the spread of stablecoins depends on whether issuers hold their reserve assets within the banking system. If stablecoin issuers deposit a significant portion of their reserves in U.S. banks, the potential scale of deposit outflows could be greatly reduced, according to his analysis.