Stablecoin Boom Threatens Traditional Banks' Profits, Jefferies Warns

Jefferies analysts warn that stablecoins — digital tokens pegged to fiat currencies — are unlikely to trigger an immediate run on U.S. bank deposits but could steadily erode bank profitability over the next five years, as activity shifts into payments and crypto markets.

“Stablecoin boom could eat into traditional banks' profits, warn Jefferies analysts Digital dollar use in payments and crypto markets may slowly pull deposits from banks, forcing lenders to seek pricier funding, a new report by Jeffries finds”

@coindesk

The report estimates a 3%–5% runoff in core deposits over five years and projects that the average bank could face roughly a 3% hit to earnings due to higher funding costs and pressure on fee income.

@coindesk

Jefferies frames the shift as a medium-term competitive threat in which stablecoins serve as 24/7 circulating digital cash that connects to decentralized finance use cases offering yields above most bank accounts.

Jefferies points to rapid market growth and expanding use cases as the mechanism driving deposit pressure: stablecoin supply grew to about $305 billion by end-2025 (up 49% year-over-year) and adjusted transfer volume rose to $11.6 trillion in 2025, trends the report says have pushed stablecoins beyond trading into payments, cash and treasury management, and cross-border transfers.

Jefferies projects the sector could expand further — potentially reaching $800 billion to $1.15 trillion in the next five years — amplifying the gradual erosive effect on traditional deposit bases if adoption continues.

CoinDesk

Regulatory changes alter the near-term risk profile: Jefferies and analysts highlight that the GENIUS Act, passed in July 2025, bans regulated stablecoin issuers from paying yield directly to passive holders, which reduces the chance of an abrupt deposit flight;

“Stablecoin boom could eat into traditional banks' profits, warn Jefferies analysts Digital dollar use in payments and crypto markets may slowly pull deposits from banks, forcing lenders to seek pricier funding, a new report by Jeffries finds”

@coindesk

At the same time, Jefferies notes that the CLARITY Act (or market-structure bill) — if enacted as described — would cement stablecoins as payment instruments rather than savings products by closing a perceived yield loophole, shaping how attractive stablecoins are as alternatives to bank accounts.

Jefferies frames the competitive dynamic as a broader clash between crypto firms and traditional banks: bank executives have voiced concern about large-scale deposit migration, with Bank of America’s CEO warning about the possibility of trillions shifting into stablecoin-linked products;

Jefferies recommends banks respond by developing tokenized payment solutions and adapting treasury and product offerings to defend deposit franchises and fee income streams.

CoinDesk

While Jefferies does not portray stablecoins as an immediate existential threat — citing regulatory limits and the unlikelihood of a sudden run — its analysis warns of a gradual profitability squeeze that would raise funding costs and compress margins,

“Stablecoin boom could eat into traditional banks' profits, warn Jefferies analysts Digital dollar use in payments and crypto markets may slowly pull deposits from banks, forcing lenders to seek pricier funding, a new report by Jeffries finds”

@coindesk

This means banks that fail to adopt tokenized payments and other digital offerings face a steady erosion of core deposit revenue over a multi-year horizon.

@coindesk