Stablecoins threaten billions in bank deposits: warning from Bank of America CEO

The rise of stablecoins poses a significant challenge to traditional banks. According to Brian Moynihan, CEO of Bank of America, these digital currencies could attract up to six trillion dollars in bank deposits—a shift that could fundamentally destabilize the financial system.

Moynihan’s concern: billions of dollars to blockchain alternatives

During an investor conference, Moynihan expressed his concern about the potential outflow of savings to stablecoins and yield products linked to these digital assets. While he expressed confidence that his bank will adapt to this development, he emphasized the broader systemic risk.

“We’ll manage,” Moynihan said, “but the bigger concern we’ve all taken to Congress is that trillions of dollars could migrate from bank balance sheets.” This is not just a problem for Bank of America— with two trillion dollars in deposits by the end of 2025, the institution is deeply intertwined with the US credit infrastructure. If only a fraction of these funds disappear, the consequences could be significant.

The problem: credit capacity and lending costs

The core issue behind Moynihan’s warning concerns the relationship between deposits and lending. Deposits are not only an asset on banks’ balance sheets—they form the funding source through which institutions lend money to households and small businesses. If these savings shift to stablecoins, banks’ lending capacity shrinks.

This leads to a multiplier effect: banks would need to rely more on expensive wholesale funding, driving up lending costs. For small and medium-sized enterprises—who already have less access to capital than large corporations—this could be particularly damaging. The economic implications of such a scenario are therefore not only bank-specific but threaten the broader credit ecosystem.

The legislative battle over stablecoin yields

A key element in this debate is the so-called “regulatory arbitrage” that stablecoin issuers exploit. While legislation like the GENIUS Act—passed last year—aimed to establish a federal framework for stablecoin issuers, financial institutions have pushed for stricter safeguards.

The core issue: stablecoin issuers are increasingly offering yields that effectively circumvent the law. Although direct interest payments by issuers are prohibited, they find creative ways to offer yield-like incentives—making them essentially transform into yield-bearing deposits. RBC Capital Markets analyst Gerard Cassidy has highlighted these loopholes, and Congress is currently debating provisions to close them. However, progress has stalled after Coinbase withdrew its support for the bill.

The American Bankers Association (ABA)—representing more than 100 financial institutions—recently urged senators to close these “dangerous loopholes” and subject stablecoin issuers to the same regulatory requirements as traditional banks.

A divided banking sector

Remarkably, the public stance of Bank of America differs significantly from that of other major lenders. JPMorgan recently downplayed the risk that stablecoins could pose to the financial system. A JPMorgan spokesperson noted that “there have always been multiple layers of money in circulation”—central bank money, commercial money, and institutional money—and that stablecoins will simply form an additional layer.

This position sharply contrasts with the concerns expressed by community banks and Bank of America. The traditional banking sector is thus divided: large institutions like JPMorgan see stablecoins as complementary, while smaller and mid-sized players—and apparently Bank of America—view them as competitive.

What’s at stake

With two trillion dollars in deposits on Bank of America’s balance sheet alone, the stakes of this debate are enormous. Even a small migration to stablecoins could cause significant shifts in credit extension. It’s not just about technological innovation but about the fundamental funding structure of the US economy.

As Congress tightens regulations and stablecoins continue to flow into the regulated mainstream environment, the tension between innovation and financial stability will only grow.