Stablecoins are still coming for bank deposits, right?

Is anything more dear to a community banker than the funds customers keep on deposit at the bank? Enter stablecoin, the cyber currency endorsed by the U.S. federal government in 2025. These digital dollars sparked legitimate fears from community banks surrounding their potential impact on deposit sources. One year later, have those concerns become a reality? The answer depends on who you ask. But the short answer is ‘not really.’.First, the obligatory explainer. What’s the big difference between stablecoins and, say, Bitcoin? Bitcoin is like digital gold. It is speculative and volatile. A stablecoin is a digital dollar backed one-to-one by actual U.S. currency. Its value is therefore stable but also benefits from crypto’s superpower of immediate transactions globally. The GENIUS Act passed by Congress and signed last year is aimed at regulating stablecoins as a specific payment instrument.Currently, banks cannot directly issue stablecoins. Banks can create a subsidiary to do the job, or partner with an issuer. But these entities make money almost strictly through fees and investments, not the traditional community banking model based on lending. The stablecoin entity, unless it’s a fraud, must keep a level of capital in its coffers beyond the value of its issued stablecoins. That capital cannot be issued as a loan.Hence the initial concern that stablecoins could pull deposits away from community banks. If deposits can migrate to frictionless, programmable tokens that live outside the traditional banking system, the community bank model begins to erode.Despite the concern, early studies suggested the threat to community banks specifically may have been overstated. More recent surveys say this is mostly holding true after a year, but the initial concerns remain.An early comprehensive study from global financial consultant Charles River Associates used monthly data from 2019 to 2025 to predict that stablecoin adoption and community bank deposits were simply not going to have any significant effect on each other. Even in the study’s worst-case scenario assuming every stablecoin dollar came directly from community bank deposits, the impact would be less than 7 percent. More realistic scenarios pointed to a 1 percent loss over time.A February 2026 study conducted by the Federal Reserve Bank of New York suggested banks that have begun working with stablecoin issuers are starting to show a decrease in lending, but not necessarily a decrease of deposits. This makes perfect sense considering the amount of capital required to have on hand to be involved with stablecoins.However, a study released by The White House in early April suggests stablecoin adoption is leading to more lending across the banking spectrum, including community banks. (The American Bankers Association disagreed with the White House report, claiming it was “asking the wrong questions.”) Both the Charles River and White House studies are easily found online. If you bother to read them you might notice neither is showing an enormous swing one way or the other. Depending on where one’s bias might be on the subject, right now a case can be made in either direction: stablecoins are reducing community bank lending. But wait! They are also competitive tools to increase profits, a bank’s financial footing and, therefore, leading to more lending.This may not be very satisfying, but that was a windy way of saying “we don’t really know what stablecoins are doing to lending or deposits quite yet.”S. Dexter Schrodt, president and CEO of the Nebraska Independent Community Bankers, penned an op-ed for the Nebraska Examiner late last year that hasn’t grown stale. His message, regardless of the new wizbang technology promising a brighter future, is that come what may, community banks have to stay diligent when it comes to making sure unfolding regulation doesn’t leave them in the dust.“What is important for community bank survival as technology progresses and interest in stablecoins grows is for Congress to ensure stablecoin companies are subject to a similar regulatory regime as banks, such as consumer protection and anti-money laundering laws,” Schrodt writes.“Furthermore, it is critical that stablecoin companies and big tech companies issuing stablecoins cannot siphon away deposits from banks by offering interest via third parties, profit sharing, rewards or rebates to a consumer or business customer in exchange for bringing their money over to stablecoins. To put it quite simply, without deposits community banks will not be able to offer the volume of agriculture, small business and mortgage loans that are currently the backbone of Nebraska’s economy.”That likely applies to the vast majority of community banks right now.