Bank of America CEO warns interest-bearing stablecoins could pull $6T from US banks

Bank of America CEO Brian Moynihan recently issued a stark warning regarding the potential destabilizing effects of interest-bearing stablecoins on the U.S. banking system. Moynihan cautioned that these digital assets could siphon as much as $6 trillion in deposits away from commercial banks if regulators allow them to operate without stringent oversight.

The core concern centers on the vast pool of uninsured, non-interest-bearing deposits currently held by traditional banks. Interest-bearing stablecoins, which promise competitive yield derived from underlying reserve assets or decentralized finance (DeFi) mechanisms, offer a far more attractive alternative for institutional and large retail investors than typical bank deposits, especially those yielding negligible returns. This creates an existential competitive threat to traditional banking models.

Moynihan’s $6 trillion estimate represents a substantial portion of the deposit base currently funding bank lending and operations. If this capital flows rapidly into the stablecoin ecosystem, banks could face significant liquidity challenges and an immediate increase in their cost of funding, potentially tightening credit availability across the economy.

The warning underscores the urgent need for regulatory clarity regarding digital assets. Bank leaders argue that stablecoins must be subjected to the same capital, liquidity, and consumer protection requirements as chartered banks to ensure a level playing field and prevent systemic risk resulting from a mass flight of capital into the less-regulated digital finance sector.

Source: Bank of America CEO warns interest-bearing stablecoins could pull $6T from US banks