TLDR
- Jefferies projects stablecoins may reduce core bank deposits by 3%–5% within five years
- Banks could experience approximately 3% earnings decline due to higher funding costs
- Stablecoin market value reached $314 billion with potential growth to $1.15 trillion over five years
- GENIUS Act prohibits stablecoin issuers from offering yield to passive holders, slowing immediate deposit migration
- Wintrust Financial and Webster Financial among institutions facing highest vulnerability
The stablecoin sector continues its rapid expansion. Current market capitalization stands at approximately $314 billion, marking significant growth from the $184 billion recorded in 2022.
According to Jefferies analysts, this upward trajectory poses a gradual threat to conventional banking revenue. Their recent analysis projects traditional banks may experience a 3% to 5% erosion of core deposits during the coming five years.
This deposit migration would compel banks to secure more costly funding sources. David Chiaverini and his team of analysts forecast average banking institutions could witness earnings decreases of approximately 3%.
“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 cryptocurrencies anchored to traditional currencies such as the U.S. dollar. These digital assets serve multiple functions in crypto trading while gaining traction in payments processing, treasury operations, and international money transfers.
Stablecoin transaction volume climbed to $11.6 trillion throughout 2025. Total supply reached $305 billion by year-end 2025, representing a 49% annual increase.
Jefferies forecasts place the stablecoin market between $800 billion and $1.15 trillion within a five-year timeframe.
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.
Stablecoins operate continuously and integrate with decentralized finance platforms offering returns exceeding typical bank account rates. This functionality appeals to users seeking greater capital efficiency.
Meanwhile, regulatory measures enacted in the United States last year mitigate some immediate concerns. The GENIUS Act, which became law in July 2025, prevents regulated stablecoin issuers from distributing yield directly to passive token holders.
This regulatory framework moderates the pace at which deposits might transition from traditional checking and savings products into stablecoins.
Banks Are Moving to Compete
Several prominent financial institutions have begun taking action. Fidelity Investments introduced its proprietary stablecoin, the Fidelity Digital Dollar.
Bank of America’s Moynihan indicated the institution plans to launch a stablecoin following Congressional authorization. Goldman Sachs CEO revealed his company has deployed substantial personnel resources toward tokenization and stablecoin initiatives.
Jefferies identifies banks maintaining higher concentrations of retail and interest-bearing deposits as facing 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 most vulnerable institutions within their coverage universe.
The Jefferies report was published on Tuesday, March 10, 2026.
