Bank of America Warns: Stablecoins Could Impact Traditional Banking

Bank of America has raised concerns about the growing adoption of stablecoins and their potential effects on the U.S. banking system. During a recent earnings call, CEO Brian Moynihan highlighted that stablecoin deposits could lead to a significant outflow of bank deposits, potentially up to 6 trillion, which would reduce lending capacity and increase borrowing costs for consumers and businesses.
Moynihan explained that if deposits shift from traditional banks to stablecoins, it would take lending capacity out of the system. This shift could disproportionately affect small and medium-sized businesses that rely on bank credit, while larger companies with access to capital markets might not feel the impact as much. He stated,
When you think about that, that takes lending capacity out of the system. And that is the bigger concern that we ve all expressed to Congress as they think about this.
The proposed regulatory framework for stablecoins resembles that of money market mutual funds, requiring them to be backed by short-term assets like bank deposits or U.S. Treasurys. While this could alter fund circulation through the banking system, Moynihan reassured that Bank of America is prepared to adapt to these changes. He said,
We ll meet customer demand, whatever may surface. And so I don t worry about it.
However, he acknowledged that moving deposits outside the traditional banking system would necessitate banks to rely on alternative funding sources, which often come at a higher cost. This could lead to increased borrowing expenses for businesses and consumers. Moynihan described this situation as an industrywide policy challenge rather than a specific threat to Bank of America.
As stablecoin legislation progresses in Congress, banking trade groups are actively engaging with lawmakers to address these concerns and mitigate potential risks to the financial system.