The regulatory bottleneck in Washington is masking a trillion-dollar threat to the U.S. banking core. The rise of stablecoins is moving beyond emerging markets to become a direct threat to domestic balance sheets, investment bank Standard Chartered said in a Tuesday report.
The primary risk for U.S. lenders is the erosion of net interest margin (NIM), according to Geoff Kendrick, head of digital assets research at Standard Chartered. He identified NIM as the most critical vulnerability because it is driven by the very deposits now being lured away by digital assets.
NIM is a critical gauge of bank profitability that tracks the spread between interest earned on assets and interest paid out to depositors.
The bank’s analysis shows that U.S. regional banks are significantly more exposed than diversified giants or investment firms. Because regionals rely more heavily on interest income, the loss of sticky retail deposits to stablecoins hits their bottom line harder.
“We find that regional U.S. banks are more exposed on this measure than diversified banks and investment banks, which are least exposed,” Kendrick wrote.
Often serving as the crypto economy’s primary payment rails and cross-border settlement tools, stablecoins are digital assets pegged to stable reserves like fiat or gold. The sector is dominated by Tether’s USDT, followed by Circle’s USDC.
Tether is making its move into the U.S. domestic market with USAT, a dollar-backed token issued by Anchorage Digital Bank, the company said on Tuesday.
Standard Chartered’s analysis modeled a bleak outlook for traditional deposit retention. While issuers could theoretically mitigate this by holding reserves in the banks they disrupt, industry leaders Tether and Circle (CRCL) hold just 0.02% and 14.5% of their reserves in bank deposits, respectively.
With a projected stablecoin market cap of $2 trillion by 2028, the bank estimated that $500 billion will exit developed market banks over the next three years.
The catalyst for this shift 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 big banks support but crypto leaders like Coinbase (COIN) warn could stifle the industry. Despite the current impasse, Standard Chartered anticipates the bill will pass by late Q1 2026.
Read more: Stablecoins and self-custody are driving the rise of crypto neobanks
