Bank of America CEO Signals Potential $6 Trillion Shift to Stablecoins

Bank of America CEO Brian Moynihan has issued a warning that up to $6 trillion in deposits could transition from traditional banking into stablecoins, highlighting increased tensions between conventional banks and the growing digital asset industry.

Key Takeaways:

Bank of America’s CEO estimates that as much as $6 trillion in US bank deposits could switch to stablecoins.
Banks are concerned that stablecoins offering yields may deplete deposits and restrict lending.
Lawmakers are actively working to limit the yields on stablecoins as a new cryptocurrency regulation bill approaches its deadline.

During the bank’s earnings call on Wednesday, Moynihan expressed concern that approximately 30% to 35% of all commercial bank deposits in the U.S. could flow into stablecoins, depending on regulatory developments. This estimate is grounded in studies conducted by the Treasury Department and emphasizes the link between potential changes in law and consumer interest in stablecoins that yield returns.

Bank of America CEO Warns $6T in Deposits Could Flow into Stablecoins

Concerns Over Stablecoin Yields and Deposit Exits

A central issue in this debate is whether stablecoin issuers should be permitted to provide yields on stablecoin holdings. Many banks worry that this could expedite the outflow of deposits, as customers would have access to bank-like products without corresponding regulations typically applied to banks.

Moynihan mentioned that several stablecoin models function more like money market mutual funds than traditional bank deposits. The reserves for these stablecoins are generally kept in short-term assets, such as U.S. Treasurys, rather than being reinvested in loans for individuals and businesses.

This situation, he noted, could lead to a contraction in the deposit base that banks rely on to issue loans across the economy. “If deposits are withdrawn, banks may either be unable to provide loans or they will have to seek wholesale funding, which would likely come at a higher cost,” Moynihan explained.

Lawmakers are currently under pressure to resolve these issues as the Senate Banking Committee progresses on a comprehensive bill concerning crypto market structuring.

The latest draft of such legislation, made public on January 9 by Committee Chair Tim Scott, proposes prohibiting digital asset service providers from offering interest or yield to customers simply for maintaining their stablecoin holdings. However, the draft does permit rewards linked to activities such as staking, providing liquidity, or posting collateral, clearly differentiating between passive holding and active engagement.

The urgency to advance the bill has increased, with over 70 amendments submitted prior to a forthcoming markup, indicating substantial lobbying efforts from both banking institutions and cryptocurrency firms. Additional points of contention include proposed ethical regulations that have surfaced in light of allegations concerning President Donald Trump's financial gains from family-affiliated crypto operations.

Galaxy Research Raises Alarm Over Regulatory Implications

Concerns surrounding the bill extend beyond the banking sector. A report from Galaxy Research has warned that the legislation could significantly heighten the Treasury Department's powers to monitor digital asset transactions.

Additionally, support within the industry is beginning to wane. On Wednesday, Coinbase CEO Brian Armstrong stated that the exchange could not endorse the bill due to provisions that would, in his view, effectively eliminate stablecoin rewards for users. Subsequently, Scott announced that the committee had postponed the planned markup, indicating that discussions were still ongoing and asserting that “everyone remains at the table working in good faith.”