MW Stablecoins could hurt bank profits, but not for a while: analyst

By Steve Gelsi

Growing use of stablecoins could increase the cost of lending for banks if they have fewer deposits to draw from, Moody's says

The wider adoption of stablecoins won't impact the bottom lines of established banks right away, Moody's Ratings analysts said, but could push up lending costs and hurt payment-fee income down the road.

While the regulatory framework for stablecoins has yet to become law, it could have a wide-ranging impact on the banking sector after it's set up, Moody's said.

Earlier this year, the House Financial Services Committee advanced what's known as the Stable Act.

Next week, House lawmakers are planning a "Crypto Week" to take up industry-friendly bills and may approve the Senate-passed Genius Act. President Donald Trump has urged House Republicans to approve the Senate's stablecoin bill.

Also read: New crypto bill could turbocharge the stablecoin industry: 4 changes it might bring

The measures aim to establish the first federal rules for stablecoins, with the expectation that it will encourage wider use of the cryptocurrency that's typically exchanged one-for-one for a government-issued currency or debt instrument.

"If use of stablecoins were to rise meaningfully, banks could face pressure on payment-related fee income," Moody's analysts said.

The impacted revenue streams for payments could include interchange fees, deposit wire fees, and Treasury cash-management fees, Moody's said.

The cost of capital for lending could go up if stablecoins draw money away from traditional bank deposits and non-interest-bearing transaction accounts.

"A decline in deposit funding, if not offset by increased debt or equity issuance, could also constrain banks' lending capacity," Moody's said.

At the same time, banks' trading and underwriting revenue could also be impacted if stablecoins support greater issuance of tokenized instruments on distributed ledger platforms as a lower-priced alternative, analysts said.

Moody's analysts did not lay out a specific timeline for any of these longer-term effects to kick in on banks.

Wall Street doesn't seem too concerned at the moment, as the SPDR S&P Bank ETF KBE has rallied 18.8% over the past three months through Tuesday, while the S&P 500 index SPX has gained 14.1%. Shares of the largest banks - JPMorgan Chase & Co. (JPM), Bank of America Corp. $(BAC.SI)$, Wells Fargo & Co. $(WFC)$ and Citigroup Inc. (C) - have all hit 52-week highs in the past week.

The more dominant financial names may still figure out ways to thrive despite challenges posed by stablecoins, analysts said.

"Most banks, particularly the largest, are well-positioned to navigate this evolving landscape because of their customer trust, risk management infrastructure and compliance expertise," Moody's said. "This could open new revenue streams and opportunities for product innovation."

Together, USTC stablecoin (USDTUSD) issuer Tether and UTDC (USDCUSD) stablecoin issuer Circle Internet Inc. $(CRCL.UK)$ hold about $150 billion in U.S. Treasurys, accounting for about 90% of the global stablecoin market capitalization and transaction volume, according to Moody's estimates.

For now, most stablecoins are used to settle transactions involving cryptocurrencies. But it also remains to be seen if they catch on for use in more routine payment transactions.

"For stablecoins to achieve broader adoption domestically, they would need to offer a compelling advantage over existing consumer and commercial payment systems, which are already widespread, generally low-cost, user-friendly and increasingly fast," Moody's analysts said. "Assuming issuers are prohibited from paying any kind of financial incentive, we view the likelihood of a significant shift in domestic payments toward stablecoins as relatively modest."

While cross-border payments may offer a market opportunity for stablecoins, these transactions are currently more cumbersome due to financial institutions' caution around anti-money-laundering and bank-secrecy regulations, analysts said. Therefore, greater efficiency of transactions offered by stablecoins may not offer much of an advantage on that front.

Robert Schroeder contributed.

-Steve Gelsi

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July 09, 2025 09:30 ET (13:30 GMT)

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