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Stablecoins can make some banks pay more to keep deposits and may constrain lending, but they do not automatically remove an equal amount of deposits from the banking system. The impact depends on what issuers hold in reserve, where payment proceeds go, which banks gain or lose funding, and how banks respond. Evidence includes transaction-level findings in a particular setting and models of specific scenarios—not a single forecast that stablecoins will reduce lending across all banks.
How stablecoins can change bank funding
The effect begins when a household or business uses money to buy a stablecoin instead of leaving it in a bank deposit. The issuer receives the funds and acquires reserve assets. Later payments can move money among banks, issuers, and asset sellers. Banks then adjust to the resulting changes in the amount, location, and reliability of their funding.
That sequence matters because a stablecoin purchase is not necessarily a permanent withdrawal of a dollar from bank deposits in aggregate. If the issuer holds bank deposits, the money may remain in the banking system but become concentrated in an issuer’s or custodian’s account. If the issuer buys Treasury bills, the seller receives the purchase proceeds and may deposit them at a bank. How much money returns to banks, and when, depends on who sells the bills and what they do with the proceeds.
Even where aggregate deposits change little, their composition can shift. Replacing many household deposits with large balances held by an issuer can leave banks with funding that is more concentrated and potentially more sensitive to rate changes. That can affect liquidity management and funding stability without a one-for-one decline in total deposits.
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Why deposit costs may rise—and what banks can do
When customers can move funds into stablecoins, banks may have to offer more competitive deposit rates to retain or attract funding. The Bank for International Settlements (BIS) states in its 2026 Annual Economic Report, Chapter III, that “Rising competition for funding from stablecoins would generally imply rising pressure on banks to raise deposit rates, increasing banks’ funding costs.” The degree of pressure depends on adoption, stablecoin design, market conditions, and how much deposit competition banks already face.
Higher marginal funding costs can prompt banks to reprice loans, seek other sources of funding, or hold more liquid assets. Those responses can affect the price or availability of credit, but they are not automatic or identical at every bank. Banks’ ability to pass costs on, and borrowers’ ability to find financing elsewhere, depend on market structure and institutional constraints.
A Federal Reserve note by Jessie Jiaxu Wang, published December 17, 2025, reports that banking literature it cites finds more than 60% pass-through of funding-cost increases into lending rates. That is evidence about banking more broadly, not a stablecoin-specific pass-through estimate. The same note cites deposit-funding multiplier estimates in a range of 0.6–1.26; this range likewise should not be read as a measured multiplier for stablecoin activity.
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How reserve choices change the transmission
The immediate funding effect depends in part on what an issuer holds and on the transactions that follow. These scenarios describe possible channels, not guaranteed outcomes for every stablecoin or bank.
| Reserve asset | Potential bank-funding channel | What determines the result |
|---|---|---|
| Bank deposits | Funds may remain as deposits in the banking system but shift from many customers to a concentrated issuer or custodian account. | Which banks receive the balances, how concentrated and rate-sensitive they are, and whether they remain available as stable funding. |
| Treasury bills | An issuer’s purchase transfers funds to the bill seller. The seller may redeposit the proceeds, so the purchase does not mechanically determine the net change in bank deposits. | Who sells the bills, where proceeds are held or spent, and how quickly funds return to bank accounts. |
| Central-bank reserves | The BIS discusses reserve arrangements involving central-bank balances as a distinct design with different implications for bank funding and liquidity. | The applicable reserve rules, settlement arrangements, and policy framework. The sources do not establish one universal deposit or lending outcome for this design. |
Reserve composition is only part of the picture: the original depositor, the issuer’s counterparties, settlement flows, and the banks involved all shape the outcome. Stablecoin-related deposits may accrue to some banks even as other banks lose retail funding.
Why lending effects can vary across banks and borrowers
The New York Fed’s February 2026 Staff Report No. 1185, “Stablecoin Disintermediation,” combines a theoretical account with transaction-level data linking on-chain transactions and wholesale interbank payments. In the study’s setting, it finds that stablecoin activity can transmit liquidity shocks to banks. It also reports that partner banks’ loan share of assets contracts relative to peers. This is an observed relative outcome in that setting, not proof that every bank will cut lending when stablecoin use grows.
Where funding shifts from smaller banks to issuer-related accounts or larger institutions, effects may fall unevenly. BIS discussion identifies small and medium-sized enterprises (SMEs) as a possible area of concern when those firms rely on smaller banks. That is a conditional distributional risk, not a finding that all SMEs will lose credit or that lending must decline economy-wide.
Independent reader supportYour contribution helps us test, update, and keep practical guides available for everyone.What the published estimates do—and do not—show
The available findings answer different questions. Transaction-level evidence, general banking estimates, and calibrated policy models should not be treated as interchangeable measures of a realized stablecoin effect.
| Evidence | What it says | How to interpret it |
|---|---|---|
| New York Fed Staff Report No. 1185, February 2026 | Reports liquidity transmission to banks and a relative contraction in partner banks’ loan share of assets compared with peers in the study’s setting. | Transaction-level evidence tied to the banks and activity examined; not a universal forecast of lending losses. |
| Federal Reserve note, December 17, 2025 | Reports over 60% funding-cost pass-through into lending rates and cites a 0.6–1.26 deposit-funding multiplier range. | These figures come from banking literature cited by the note; neither is a stablecoin-specific impact estimate. |
| Council of Economic Advisers (CEA), White House FAQ, September 15, 2026 | Estimates that a ban on stablecoin yield would produce $2.1 billion in additional bank lending, or 0.02% of bank loans, in its baseline model. The FAQ describes baseline stablecoins at about $300 billion, or 1.7% of bank deposits. | These are a modeled policy counterfactual and its baseline inputs, not observed lending changes or a general prediction for stablecoin adoption. The result depends on the model’s calibration and assumptions. |
The CEA figures concern a specific question—how a prohibition on stablecoin yield might affect lending under the model’s baseline—not the observed effect of stablecoins on bank lending. They should not be read as an estimate of what has already happened or as a forecast that applies regardless of adoption or reserve design.
Why the longer-run macroeconomic result is uncertain
BIS Working Paper 1363, “The macroeconomics of stablecoins,” by Boris Hofmann, Matthias Kaldorf, and Matthias Rottner, was published June 23, 2026. Its modeling finds a bank-lending channel alongside a fiscal-space channel: issuer demand for Treasury bills can affect the government’s financing conditions. The balance between those channels depends on reserve rules, public debt, and foreign demand, among other assumptions. A modeled fiscal offset does not establish that any near-term pressure on a particular bank or borrower will be fully reversed.
Across the BIS analyses, quantitative projections rely on modeling assumptions and macroeconomic adjustments are uncertain. Reserve requirements, monetary-policy arrangements, deposit-rate competition, stablecoin yield, adoption scale, and the time horizon all influence modeled results. The available evidence does not settle how future regulation or market structure will shape reserve use and bank funding in practice.
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