TLDR
- A Jefferies analysis projects 3%–5% of traditional bank deposits could migrate to stablecoins within five years
- Banks may experience approximately 3% earnings decline due to increased funding expenses
- Stablecoin market capitalization reached $314 billion with potential to surge to $1.15 trillion
- The GENIUS Act prohibits stablecoin platforms from offering yield to passive users, slowing immediate deposit migration
- Regional institutions including Wintrust Financial and Webster Financial face highest vulnerability
The stablecoin ecosystem is experiencing rapid expansion. Current market capitalization stands at approximately $314 billion, representing substantial growth from the $184 billion recorded in 2022.
According to a fresh analysis from Jefferies, this upward trajectory poses a gradual but meaningful threat to conventional banking profitability. The investment firm’s research suggests financial institutions may witness 3% to 5% of their core deposit base migrate to digital alternatives within the coming five-year period.
This exodus of deposits would likely force banks toward more costly funding sources. The research team headed by David Chiaverini projects typical banking institutions could experience approximately 3% erosion in earnings.
“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 tokens have become integral to cryptocurrency markets and are increasingly utilized for payment processing, corporate treasury functions, and international money transfers.
Transaction volume for stablecoins climbed to $11.6 trillion during 2025. Total supply reached $305 billion by year-end 2025, marking a 49% annual increase.
Jefferies forecasts the stablecoin sector could expand to a range between $800 billion and $1.15 trillion over the next half-decade.
Why Banks Are Paying Attention
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.
Digital dollars operate continuously and integrate with decentralized finance ecosystems offering returns that typically exceed conventional savings products. This functionality appeals to customers seeking enhanced yield on idle capital.
However, recent U.S. regulatory developments have dampened some immediate concerns. The GENIUS Act, enacted in July 2025, prohibits licensed stablecoin providers from distributing yield directly to users holding tokens passively.
This regulatory framework constrains the velocity at which consumer deposits might flow from traditional checking and savings products into digital dollar alternatives.
Banks Are Moving to Compete
Several prominent financial institutions are proactively responding. Fidelity Investments introduced its proprietary stablecoin product, branded as the Fidelity Digital Dollar.
Bank of America’s Moynihan indicated his institution would deploy a stablecoin offering should Congress provide explicit authorization. Goldman Sachs CEO disclosed his company has deployed significant personnel resources toward tokenization initiatives and stablecoin development.
Jefferies highlights that banks maintaining elevated concentrations of retail customer deposits and interest-bearing accounts face greater vulnerability compared to larger institutions already building digital asset capabilities.
The analysis specifically identifies Wintrust Financial, Flagstar Financial, Webster Financial, Eagle Bancorp, and Axos Financial as the financial institutions facing greatest exposure among those covered in the research.
The Jefferies report was published on Tuesday, March 10, 2026.
