Standard Chartered Flags Stablecoins as a Growing Threat to Bank Deposit Bases

Standard Chartered has released an analysis arguing that the rapid growth of dollar-pegged stablecoins poses a measurable risk to bank deposit bases and the net interest-margin (NIM) income that funds lending and operations. The bank’s modelling shows that when stablecoin issuance expands without corresponding re-depositing of reserves into domestic banks, stablecoins effectively act as a withdrawal channel from retail deposits rather than a neutral transfer. That impact is likely to hit regional U.S. banks hardest because they rely more heavily on deposit-funded lending than diversified or investment banks. Standard Chartered quantifies possible outflows under today’s market sizing and under a stress scenario in which stablecoins scale to a multi-trillion-dollar market by 2028, projecting large deposit withdrawals in both developed and emerging markets under the larger scenario. Reserve placement by major issuers matters: low proportions of issuer reserves deposited with banks reduce the chance that stablecoin growth will recycle liquidity into domestic deposit pools. Geographic demand patterns modulate outcomes — domestic uptake directly reduces local deposit stocks, while offshore usage exacerbates cross-border capital movements and exchange-rate pressures without a direct domestic deposit hit. Complementing Standard Chartered’s findings, recent central-bank commentary from South Korea underscores another channel of risk: currency-linked or won-denominated tokens could be used to bypass capital-flow measures and amplify foreign-exchange vulnerabilities in volatile macro environments. South Korea’s central bank has publicly favoured tightly controlled issuance models — including limiting broad non-bank issuer access and concentrating issuance in regulated banks — plus explicit reserve and custody requirements and real-time monitoring to contain systemic and exchange-rate risks. Those policy options align with the report’s call for supervisors to track issuer reserve allocations and to stress-test NIM exposures, but they also illustrate trade-offs: bank-led issuance and strict domestic rules can limit deposit flight while possibly creating friction for innovation and pushing activity to lighter-touch jurisdictions. The analysis concludes that supervisors and bank risk managers should prioritise monitoring reserve locations, mapping domestic versus foreign holder composition, and building stress scenarios that capture both deposit and cross-border capital-movement channels. Regulatory decisions — from constraints on interest-bearing stablecoin yields to rules on issuer eligibility and reserve custody — will shape whether stablecoins become a systemic funding challenge or remain a manageable structural shift. The paper warns that tokenized real-world assets and other crypto-native products running alongside stablecoins could widen liquidity and earnings pressures for deposit-reliant banks if left unchecked.