Stablecoins to Disrupt U.S. Bank Deposits by 2026, Says Bank of America

Bank of America Merrill Lynch has predicted that the disruptive impact of stablecoins on traditional bank deposits and payment systems will become evident within the next two to three years. The financial institution anticipates a moderate growth in the stablecoin market, ranging from 250 million to 750 million dollars in the coming year. Despite the active preparations by major U.S. banks, there remains skepticism regarding the practical use cases of stablecoins within the domestic payment landscape. The consensus among industry experts is that cross-border payments present the most viable application scenario for stablecoins at present.

The signing of a significant legislative bill is set to usher in a new era for the digital asset market in the U.S., potentially reshaping the future landscape of traditional banking. According to a recent research report by Bank of America Merrill Lynch, as regulatory pathways for stablecoin issuance are cleared in the U.S., this digital asset is poised to exert a clear and disruptive influence on the deposit bases and payment infrastructures of traditional banks within the next two to three years.

The latest developments include the formal signing of the GENIUS Act by the U.S. President, which establishes an initial framework for the issuance and regulation of stablecoins. Concurrently, the CLARITY Act, aimed at delineating the jurisdiction of the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) over the cryptocurrency market, has been passed by the House of Representatives and is currently under review by the Senate. These legislative advancements signify a breakthrough in regulatory clarity, shifting market focus from policy debates to the actual construction of infrastructure. According to the global research and rates strategy team at Bank of America, the stablecoin market is expected to experience a moderate growth of approximately 250 million to 750 million dollars in the short term, with this incremental capital likely to boost demand for U.S. Treasury securities, particularly short-term Treasury bills.

The report emphasizes that significant changes will manifest in the medium term. As stablecoins become more integrated and widely adopted, their impact on the existing financial system will become increasingly pronounced, subjecting banks to competitive pressures from digital currencies. With the initial regulatory framework for U.S. stablecoins taking shape, the banking sector finds itself at a crossroads, balancing proactive planning with cautious observation.

U.S. banks are gearing up for the stablecoin era, with management teams across major institutions actively preparing to offer stablecoin solutions. However, there is a cautious and somewhat skeptical attitude towards specific use cases, particularly within the domestic payment ecosystem. For instance, management at JPMorgan Chase has questioned the necessity of stablecoins given the convenience of existing payment systems. Citigroup has highlighted the practical cost barriers, noting that the conversion costs between stablecoins and fiat currencies (on-ramp/off-ramp) can reach up to 7%, significantly limiting their applicability. Given the demand for interoperability and a large existing customer base, the banking industry appears to favor collaborative efforts through alliances to launch stablecoin solutions.

While there is skepticism regarding domestic applications, industry leaders generally agree that stablecoins hold promising prospects in the cross-border payment sector. The CEO of Bank of America has identified "small-value" cross-border payments as a practical use case. Regions Bank views this as a "greenfield" market, aiming to capture market share from banks that outsource cross-border payment services. However, most banks anticipate minimal short-term impact on their core domestic payment services. The CEO of U.S. Bank has noted that while stablecoins may intensify competition in fund management services, they are unlikely to significantly affect bank card and merchant acquiring businesses.

Overall, while U.S. banks report current customer interest in stablecoins as "lukewarm," nearly all institutions are closely monitoring developments and are prepared to act swiftly should customer demand accelerate. From JPMorgan Chase's deposit token JPMD to Bank of New York Mellon providing custodial services for leading issuers like Circle, the banking sector is quietly laying the groundwork for stablecoin integration.