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Stablecoins can raise banks’ deposit costs and affect lending, but they do not automatically remove an equal amount of money from the banking system. The outcome depends on what issuers hold in reserve, where payment proceeds go, and which banks lose deposits or receive issuer funds. A shift from ordinary retail deposits to large, concentrated balances can matter to banks even when the system’s total deposits change little.
How can a stablecoin purchase affect bank funding?
A stablecoin is a digital token designed to maintain a stable value, commonly against a currency such as the US dollar. When a person or business buys one, the issuer receives funds and holds reserve assets intended to support redemption. That transaction can change both the amount and the distribution of bank funding:
- A customer uses a bank deposit or another payment method to buy the stablecoin.
- The issuer holds the proceeds in assets permitted by its reserve arrangements, such as bank deposits or Treasury bills.
- Payments and asset sales move funds among the issuer, banks, and other market participants.
- Banks respond to any resulting change in the amount, cost, and reliability of their funding.
The key distinction is between a deposit leaving one bank and a deposit disappearing from the banking system as a whole. If the issuer places funds at a bank, the balance may remain a bank deposit but become concentrated in an issuer or custodian account. If the issuer buys Treasury bills, the seller receives the payment and may deposit it at a bank. How much money returns, to which banks, and how quickly depends on the transaction chain; it is not a one-for-one or instantaneous process.
What difference do the issuer’s reserves make?
| Reserve asset | Possible effect on bank deposits and funding | What determines the result |
|---|---|---|
| Bank deposits | Funds can stay within the banking system while moving from many customers’ accounts to fewer, larger issuer or custodian balances. The receiving banks gain funding, but it may be more concentrated and potentially more sensitive to rates or outflows. | Which banks receive the balances, how stable those balances are, and how they affect each bank’s liquidity and funding profile. |
| Treasury bills | The issuer’s purchase transfers funds to the seller. If the seller redeposits the proceeds, deposits can return to banks, though not necessarily to the banks that initially lost customer funds. | Who sells the bills, where proceeds are held or spent, and the timing and scale of those flows. |
| Central-bank reserves | The effect depends on the rules and institutional arrangements governing access to those balances and on how payments settle. A change in who holds a reserve asset does not, by itself, establish how much bank lending changes. | Reserve design, the monetary-policy framework, regulation, and the distribution of funding across banks. |
The Bank for International Settlements (BIS), in its 2026 Annual Economic Report, discusses how reserve design can shape banks’ funding, liquidity, and credit. The balance-sheet path matters: an issuer’s reserve asset, the seller or recipient of funds, and the banks involved all affect the eventual result.
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Why could banks pay more for deposits?
If customers move money from bank accounts into stablecoins, banks that lose those deposits may have to compete harder to retain or replace funding. They can offer higher deposit rates, seek other sources of funding, reduce or reprice some lending, or hold more liquid assets. The BIS’s 2026 Annual Economic Report puts the general mechanism plainly: “Rising competition for funding from stablecoins would generally imply rising pressure on banks to raise deposit rates, increasing banks’ funding costs.”
The pressure is unlikely to be uniform. A bank that loses low-cost retail balances may face a different problem from one that receives a large issuer deposit. Even if the receiving bank’s total funding rises, a concentrated balance may be less stable than a broad base of customer deposits. A change in funding composition can therefore matter to liquidity management even when aggregate deposits are little changed.
Higher marginal funding costs can feed through to lending rates or loan availability, but the pass-through is not automatic or identical across banks. The Federal Reserve’s December 2025 note by Jessie Jiaxu Wang reviews banking literature reporting that more than 60% of funding-cost increases pass through to lending rates. That figure is evidence cited from the broader banking literature, not an estimate of the stablecoin-specific effect. Wang also reports a deposit-funding multiplier range of 0.6–1.26 based on estimates in cited studies; it should not be interpreted as a direct multiplier for stablecoin adoption.
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Could stablecoins reduce bank lending?
They could contribute to reduced lending at some banks if lost deposits make funding more expensive or less reliable. A bank facing that pressure might raise loan rates, tighten credit, or shift toward liquid assets. But the effect on lending across the system depends on whether funds return through issuer reserves or asset sales, which banks receive them, and how banks respond to their funding constraints.
A February 2026 New York Fed staff report, “Stablecoin Disintermediation,” by Michael Junho Lee and Donny Tou combines a theoretical account with transaction-level evidence linking on-chain transactions and wholesale interbank payments. In the study’s setting, the authors find that stablecoin activity can transmit liquidity shocks to banks and that partner banks’ loan share of assets contracts relative to peers. This is observed relative performance among the banks examined, not a forecast that every bank’s lending will fall by the same amount.
Distribution across banks may also affect which borrowers feel any change. The BIS identifies small and medium-sized enterprises as a possible concern where they depend on smaller banks that lose funding. That is a conditional risk, not evidence that SME credit must decline whenever stablecoins grow. Issuer balances may accrue to other banks, and the final effect depends on how funding and lending adjust.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What do published estimates actually tell us?
Different kinds of evidence answer different questions. Transaction-level findings describe activity and outcomes in a particular setting; model estimates describe what could happen under specified assumptions. Neither should be mistaken for a universal, observed lending effect.
New York Fed evidence: a bank-level liquidity channel
The February 2026 New York Fed report identifies a channel through which stablecoin-related activity can transmit liquidity shocks and reports a relative contraction in loan share at partner banks. It helps show how funding flows can matter to particular banks, but it does not establish a single aggregate effect for all banks, reserve structures, or adoption levels.
CEA estimate: a specific yield-ban counterfactual
A September 15, 2026, Council of Economic Advisers (CEA) White House FAQ reports a model estimate of $2.1 billion in additional bank lending, or 0.02% of bank loans, under a baseline scenario for a ban on stablecoin yield. The FAQ’s baseline assumes stablecoins of about $300 billion, equal to 1.7% of bank deposits. These are model inputs and a result for that policy counterfactual—not a measured effect of stablecoin use or a general forecast of what adoption will do to lending.
BIS modeling: bank credit and fiscal space
A June 23, 2026, BIS Working Paper by Boris Hofmann, Matthias Kaldorf, and Matthias Rottner models the macroeconomic effects of stablecoins. It identifies a bank-lending channel alongside a possible fiscal-space channel: issuer demand for Treasury bills may affect government financing conditions. Which channel is stronger depends on assumptions including reserve rules, public debt, and foreign demand. The authors characterize macroeconomic adjustments as uncertain; their quantitative projections are conditional on the model’s calibration and scenarios.
What determines whether the effect is large or small?
- Reserve composition: Bank deposits, Treasury bills, and central-bank reserves create different paths for funding and settlement.
- Where funds go next: A Treasury seller may redeposit proceeds, but the destination and timing are not guaranteed.
- Which banks are affected: Some banks can lose retail deposits while others gain issuer balances; the resulting funding mix can differ in stability and cost.
- Adoption and market structure: The scale of stablecoin use and the concentration of issuer relationships shape the size and distribution of flows.
- Rules and incentives: Reserve requirements, liquidity regulation, monetary-policy arrangements, and whether stablecoins pay yield affect banks’ choices and users’ incentives.
- Time horizon: Short-run transitions in funding and liquidity are different from longer-run changes in lending or government financing.
For that reason, there is no single causal estimate that applies across stablecoin designs, reserve mixes, adoption levels, and types of banks. The available evidence supports plausible funding and lending channels, but future regulation and market structure will influence how those channels operate in practice.
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