Bank of America’s Chairman and Chief Executive Officer Brian Moynihan cautioned that interest-bearing stablecoinscould siphon up to $6 trillion from traditional U.S. bank deposits, potentially undermining banks’ ability to finance lending — especially to small and medium-sized businesses — and leading to higher borrowing costs, according to comments made on the bank’s recent quarterly earnings call and public statements.
Stablecoin Yield Could Trigger Mass Deposit Migration
Moynihan’s warning centers on the possibility that stablecoins — digital assets pegged to the U.S. dollar — could attract large swaths of deposits away from commercial banks if issuers are permitted to pay interest or yield on holdings similar to a savings account. Drawing on analyses cited from the U.S. Treasury Department, he said up to 30 % to 35 % of U.S. commercial bank deposits could flow into stablecoin products under certain conditions, amounting to roughly $6 trillion.
During the earnings call, Moynihan explained that such stablecoin models function more like money market mutual fundsby holding reserves in short-term instruments like U.S. Treasury bills rather than using deposits to finance loans. “If you take out deposits, they’re either not going to be able to loan or they’re going to have to get wholesale funding,” Moynihan said, noting that banks would likely face higher funding costs as a result.
Impact on Lending and Small Business Borrowing Costs
If retail and commercial customers shift significant funds to yield-bearing stablecoins, banks could see a shrinking deposit base, a primary source of low-cost funding for loans to households and businesses. Moynihan suggested that banks forced to replace those deposits with wholesale funding sources — such as capital markets or central bank borrowing — would face higher costs that could ultimately be passed on to borrowers in the form of elevated interest rates.
This dynamic could be particularly acute for small and mid-sized enterprises (SMEs), which rely more heavily on bank credit than larger corporations that can access capital markets for financing. “Smaller businesses depend on traditional bank loans for financing needs. Withdrawing deposits into stablecoin products would force financial institutions toward more expensive funding,” Moynihan said.
Legislative Debate Over Stablecoin Interest Payments
Moynihan’s remarks come amid a broader U.S. legislative debate over how stablecoins should be regulated. Members of the Senate Banking Committee and other lawmakers are negotiating provisions in high-profile crypto legislation that would ban interest or yield payments on stablecoin balances held by users — a policy aimed at mitigating the risk of deposit flight from banks. However, some proposals would permit rewards tied to activity-based uses like staking, liquidity provision or transaction processing.
The banking industry’s concerns have drawn pushback from parts of the crypto sector. Coinbase CEO Brian Armstrongcriticized legislative language that would limit stablecoin yields, arguing it protects incumbents at the expense of innovation and consumer choice.
Broader Regulatory and Economic Implications
Experts note that a substantial shift of deposits into stablecoins — even at a smaller scale than $6 trillion — could have broader implications for the financial system by reducing banks’ ability to fund housing loans, business expansion and other credit-dependent activities. Research suggests that declines in low-cost deposit funding typically lead banks to raise lending rates, reduce credit supply or both.
As lawmakers and regulators refine stablecoin frameworks, Moynihan’s warnings underscore the tension between digital asset innovation and financial stability concerns, particularly the interplay between digital dollars and traditional banking models.
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