How Stablecoins Could Drain $500 Billion from Banks by 2028

According to a research report from Standard Chartered, the financial landscape is about to shift in a major way. The bank estimates that approximately $500 billion in cash could move from traditional bank deposits to stablecoins by 2028. To put this in perspective, that’s roughly equivalent to 1% of total deposits held in emerging economies like Egypt, Pakistan, Bangladesh, Sri Lanka, Turkey, India, and Kenya—regions where banking infrastructure is still developing.

This projection might seem like a modest percentage, but its implications for the global banking system are far more significant than the numbers suggest.

The $500 Billion Migration: Stablecoins Reshaping Deposit Flows

For decades, banks have thrived on three core functions: serving as a safe haven for money, acting as payment hubs, and providing credit intermediation. However, stablecoins are rapidly eroding the first two of these roles. By enabling on-chain transactions, cross-border settlements, and direct over-the-counter clearings, stablecoins are creating an alternative financial infrastructure that bypasses traditional banking altogether.

This isn’t just theoretical—it’s already happening. Users who once needed banks for international transfers can now move $500 billion worth of value through blockchain networks with minimal intermediaries. The convenience and speed of stablecoins are proving to be formidable competitors to legacy banking services.

Why Regional Banks Face the Perfect Storm

Not all banks are equally vulnerable to this shift. The impact will hit regional banks like Huntington Bancshares and M&T Bank particularly hard. These institutions depend on net interest margins for more than 60% of their revenue. In other words, they survive by lending out low-cost deposits at higher rates—a business model that works perfectly when they have a stable deposit base.

In stark contrast, diversified banking giants like JPMorgan Chase and Citigroup have multiple revenue streams: investment banking, trading, asset management, and advisory services. They can absorb deposit losses without facing existential threats.

For regional banks, losing deposits directly translates to higher borrowing costs and increased operational risk. When you can’t access cheap, stable funding, you’re forced to borrow at market rates, which squeezes profitability and makes your balance sheet more fragile.

The Hidden Time Bomb: Interest Rate Dynamics

Here’s the critical insight that many analysts miss: the deposit drain won’t feel painful right away. During high-interest rate environments—like we’ve seen recently—banks can still earn healthy spreads even with fewer deposits. They can pay higher rates to retain what remains and still turn a profit.

But the real danger emerges when interest rate spreads narrow. When the central bank cuts rates aggressively, suddenly those remaining deposits become expensive to maintain, while lending rates compress. For regional banks already operating on thin margins, this combination becomes unsustainable. Panic then sets in: depositors who already migrated part of their wealth to stablecoins see the bank as risky and move the rest.

That’s when deposit runs become a serious threat.

The Stakes for the Broader Financial System

Standard Chartered’s $500 billion estimate should be taken seriously not just for its magnitude, but for what it represents: the beginning of a structural shift in how money flows through the financial system. Even if the actual figure turns out to be smaller, the trend is unmistakable. Stablecoins are no longer a niche cryptocurrency experiment—they’re becoming a genuine alternative to traditional banking services.

Regional financial institutions will need to innovate quickly or consolidate. Central banks will face pressure to adapt their monetary policy frameworks. And depositors will increasingly make choices based on convenience and efficiency rather than regulatory familiarity.

The $500 billion projection by 2028 isn’t a scare story—it’s a wake-up call that the banking system needs to evolve or risk losing its relevance in an increasingly digital financial world.