Bank of America Sounds Alarm: Stablecoins Could Drain $6 Trillion From U.S. Banks
Yield-Bearing Stablecoins Spark Bank Fears as U.S. Financial Debate Intensifies
Yield-bearing stablecoins have moved from a niche crypto experiment to the center of a growing debate between traditional banks, regulators, and digital asset innovators. During Bank of America’s fourth-quarter earnings call, Chief Executive Officer Brian Moynihan warned that these new digital instruments could redirect as much as $6 trillion away from U.S. bank deposits, raising concerns about lending capacity, funding costs, and financial stability.
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| Source: Crypto Rover |
The comments underscore a broader shift in how policymakers and financial institutions view stablecoins. Once seen mainly as tools for crypto trading, yield-bearing stablecoins are now being discussed as potential competitors to bank savings accounts and money market funds.
What Are Yield-Bearing Stablecoins?
Yield-bearing stablecoins are digital tokens designed to maintain a stable value, typically pegged to the U.S. dollar, while also offering returns to holders. Unlike traditional stablecoins such as USDT or USDC, which usually hold reserves in cash or short-term government securities without paying interest, yield-bearing versions distribute returns generated from their underlying assets.
Most of these tokens hold reserves in highly liquid, low-risk instruments such as U.S. Treasury bills or repurchase agreements. The yield from these assets is passed on to users, often at rates higher than those offered by traditional savings accounts.
This structure makes yield-bearing stablecoins functionally similar to money market funds, but with faster settlement, global accessibility, and integration into blockchain-based payment systems.
Why Banks Are Concerned
Bank of America’s leadership warned that large-scale adoption of yield-bearing stablecoins could significantly reduce the amount of customer deposits held by banks. Deposits are a core funding source for lending activities, including mortgages, consumer loans, and small business financing.
If deposits migrate into stablecoins, banks would be forced to rely on more expensive funding sources such as wholesale markets or long-term debt issuance. That shift could lead to higher borrowing costs for households and businesses.
Moynihan emphasized that while major institutions like Bank of America could adapt, smaller banks might face greater challenges due to their reliance on retail deposits.
A Growing Regulatory Battle in Washington
The debate over yield-bearing stablecoins has intensified in Congress, where lawmakers are working on new digital asset legislation. Banking industry groups are actively lobbying for stricter limits on stablecoin rewards under proposed laws such as the Digital Asset Market CLARITY Act and the GENIUS Act.
These proposals aim to restrict or redefine how stablecoin issuers can offer returns, arguing that interest-like payments blur the line between banking products and digital assets. While some versions of the legislation allow transaction incentives or staking-related rewards, direct yield payments remain a key point of contention.
Supporters of tighter regulation argue that stablecoins offering yields should be subject to the same rules as banks and money market funds, including capital requirements and investor protections.
Crypto Industry Pushback Grows Stronger
The crypto industry has responded forcefully to these concerns. Coinbase Chief Executive Brian Armstrong recently withdrew public support for the CLARITY Act, stating that it could undermine innovation, restrict stablecoin utility, and weaken decentralized finance infrastructure.
Armstrong argued that yield-bearing stablecoins represent technological progress rather than a threat, providing consumers with more efficient access to dollar-based returns. His comments contributed to delays in Senate Banking Committee discussions, effectively slowing momentum for comprehensive crypto legislation.
Industry advocates say excessive restrictions would favor legacy financial institutions while limiting competition and consumer choice.
Stablecoins Are Already Entering Mainstream Finance
Despite regulatory uncertainty, stablecoins are increasingly embedded in the global financial system. Monthly stablecoin transaction volumes now exceed $1.5 trillion, driven by payments, remittances, and card-based spending.
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| Source: DeFiLlama Data |
Major financial platforms, including Interactive Brokers, now support stablecoins such as USDC, RLUSD, and PYUSD for account funding. Global stablecoin market capitalization has surpassed $310 billion, with an estimated 220 million users worldwide.
This rapid growth suggests that stablecoins are no longer just tools for crypto traders but are becoming part of everyday financial infrastructure.
Do Yield-Bearing Stablecoins Pose Systemic Risk?
Economists remain divided. Some warn that rapid migration of deposits could strain the traditional banking system, especially during periods of market stress. Others argue that stablecoins could enhance efficiency and transparency if properly regulated.
Unlike banks, stablecoin issuers typically do not lend out reserves, reducing credit risk but also limiting their role in economic growth through lending. This structural difference lies at the heart of the policy debate.
The Bigger Picture for U.S. Financial Policy
The controversy highlights a turning point for the U.S. financial system. Stablecoins, particularly yield-bearing models, are challenging long-standing assumptions about who can offer dollar-based financial products and under what rules.
As lawmakers weigh innovation against stability, the outcome of this debate could shape the future of digital money, banking competition, and consumer finance for years to come.
For now, early 2026 marks a period of heightened tension, with banks seeking to protect their funding base and crypto innovators pushing for regulatory frameworks that recognize stablecoins as a legitimate financial evolution.
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