Blockchain Association Challenges Stablecoin ‘Deposit Flight’ Warnings / Fresh Today / CUToday.info

WASHINGTON—The Blockchain Association is challenging warnings that stablecoins will drain deposits from community financial institutions, arguing there is little evidence of such an exodus and that the greater concentration threat has come from the nation’s largest banks.

In a series of posts on X, the association pointed to FDIC and Federal Reserve Bank of Kansas City data showing community banks’ share of U.S. deposits fell from 32.9% in 2000 to 13.9% in 2020. An accompanying graphic said JPMorgan Chase and Bank of America alone held 22.4% of domestic deposits as of March 2025, compared with 13% for approximately 4,300 community banks. “Big Banks have spent decades devouring community banks’ deposits themselves,” the group said.

The association also cited industrywide deposit growth since the GENIUS Act was signed in July 2025 as evidence against claims that stablecoins and related rewards are already shrinking the deposit pool. FDIC data show domestic bank deposits rose $92.2 billion in the third quarter of 2025, $318.3 billion in the fourth quarter and $389.7 billion in the first quarter of 2026. The trend continued in the latest quarter, with deposits increasing another $142.7 billion, or 0.8%, in the second quarter—the eighth consecutive quarterly gain, according to the FDIC.

The figures, however, do not conclusively resolve the dispute. Aggregate deposit growth does not show whether individual community banks and credit unions are losing funds to stablecoin platforms, and much of the recent increase has come from uninsured deposits. Standard Chartered has estimated stablecoins could pull approximately $500 billion from U.S. banks by the end of 2028, with regional institutions particularly vulnerable, depending largely on whether issuers hold their reserves as bank deposits or invest them in Treasury securities, Reuters reported.

As CUToday previously reported, banks and credit unions are pressing Congress to close what they contend is a loophole in the GENIUS Act: Although the law bars stablecoin issuers from paying interest or yield, exchanges and other third parties may still offer rewards. The dispute has become a central issue in broader digital-asset legislation, with traditional financial institutions arguing rewards on idle stablecoin balances could accelerate future deposit flight even if FDIC data show it has not yet reduced overall bank deposits.