Bank of America CEO warns: Interest-bearing stablecoins could siphon off up to $6 trillion in deposits from the U.S. banking system

According to Cointelegraph, Bank of America CEO Brian Moynihan warned during the earnings call that if issuers are allowed to pay interest, interest-bearing stablecoins could siphon off up to $6 trillion in deposits from the U.S. banking system.

Moynihan cited research referenced by the U.S. Treasury, indicating that a significant amount of bank deposits could shift to stablecoins due to such products. He stated that the operational model of these products would be closer to money market mutual funds, with funds held in cash, central bank reserves, or short-term government bonds, rather than being used for lending.

He believes that this migration of deposits will shrink the size of bank deposits, thereby weakening the capacity for credit supply, which will particularly severely impact small and medium-sized enterprises that rely more on bank loans than on capital markets, and could potentially drive up overall borrowing costs.