Key Takeaways
- Jefferies projects that core bank deposits could decline by 3%–5% within five years due to stablecoin adoption
- Bank profitability may decrease by approximately 3% on average as institutions face higher funding expenses
- Stablecoin market capitalization reached $314 billion and may surge to $1.15 trillion over the next five years
- The GENIUS Act prohibits stablecoin providers from offering yields to passive users, reducing immediate deposit migration risk
- Regional banks including Wintrust Financial and Webster Financial face the highest vulnerability
The stablecoin sector is experiencing rapid expansion. Current market capitalization stands at approximately $314 billion, representing significant growth from roughly $184 billion recorded in 2022.
According to financial analysts at Jefferies, this expansion poses a gradual but meaningful threat to conventional banking revenue streams. A recently published analysis suggests that financial institutions may experience an outflow of 3% to 5% of their core deposit base throughout the coming five-year period.
This anticipated deposit erosion would compel banks to secure alternative funding sources at elevated costs. Research conducted by David Chiaverini and his team indicates that typical banking institutions could witness approximately 3% earnings deterioration.
“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 anchored to traditional fiat money such as the U.S. dollar. These assets have gained significant traction in cryptocurrency markets and are increasingly penetrating payments infrastructure, corporate treasury operations, and international money transfers.
Transaction volume for stablecoins climbed to $11.6 trillion throughout 2025. Outstanding supply concluded 2025 at $305 billion, marking a 49% year-over-year increase.
Jefferies forecasts anticipate the stablecoin ecosystem could expand to somewhere between $800 billion and $1.15 trillion during the next five-year window.
Banking Sector Vigilance Increases
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.
These digital assets operate continuously without time restrictions and integrate seamlessly with decentralized finance ecosystems that frequently provide returns exceeding traditional bank account rates. This characteristic makes them increasingly appealing to individuals seeking enhanced returns on their capital.
However, regulatory frameworks implemented in the United States last year mitigate some immediate concerns. The GENIUS Act, which became law in July 2025, explicitly prohibits licensed stablecoin issuers from distributing interest or yields to passive token holders.
This regulatory constraint significantly slows the potential velocity at which customer deposits might migrate from traditional checking and savings products into stablecoin alternatives.
Financial Institutions Prepare Counter-Strategies
Several prominent financial services companies are proactively positioning themselves. Fidelity Investments has already introduced its proprietary stablecoin offering, branded as the Fidelity Digital Dollar.
Bank of America’s Moynihan indicated the institution would deploy a stablecoin product contingent upon Congressional authorization. Goldman Sachs CEO revealed his organization has dedicated substantial personnel resources toward tokenization initiatives and stablecoin development.
Jefferies’ analysis indicates that banks maintaining elevated concentrations of retail customer deposits and interest-bearing accounts face greater vulnerability compared to larger institutions that have already committed resources to digital asset capabilities.
The research specifically identifies Wintrust Financial, Flagstar Financial, Webster Financial, Eagle Bancorp, and Axos Financial as the banking institutions demonstrating the highest risk exposure among those analyzed.
The Jefferies report was published on Tuesday, March 10, 2026.
