BPInsights: November 15, 2025

How Do Stablecoins Affect Bank Deposits? A Closer Look

A Coinbase Institute whitepaper claims that the growing stablecoin market will create new channels for credit, along with a host of other benefits, rather than undermine the business and consumer credit funded by bank deposits. Most of these arguments are based on dubious evidence, and several are mutually inconsistent. A new BPI note examines these claims in closer detail.

• Claim: The stablecoin market is mostly international, so these activities pose little risk to U.S. bank deposits. A plausible description of the status quo, but the presentation of the offshore-oriented stablecoin market as reassuring is at odds with many of the whitepaper's other claims about stablecoin impact in the U.S.
• Claim: There could be a modest drain on traditional deposits as some activities shift from banks to the blockchain, but lending does not vanish, instead following economic activity "on-chain." The whitepaper's claim that stablecoins expand rather than displace traditional bank lending to the real economy is supported by just a single example, the DeFi platform Aave, which does no such thing. By its own account, Aave performs a very specific function - it enables cryptocurrency market participants to lend or borrow digital assets through the Aave platform, with such transactions secured by other digital assets that borrowers have posted as collateral. No aspect of Aave's platform resembles or substitutes for the various types of real economy credit that banks provide, including mortgage loans, auto and other consumer loans, and commercial and industrial loans that form the foundation of U.S. bank activity. Furthermore, the GENIUS Act prohibits stablecoins from replicating banks' credit creation "on chain" - the law limits the investment of stablecoin reserves to a narrow class of low-risk financial instruments. Except bank deposits themselves, none of these permitted investments create credit for American consumers or businesses - instead, they fund growth in U.S. government debt.
• Claim: The growth of stablecoins poses little direct threat to U.S. banks' lending capacity. The extent to which the growth of stablecoins displaces bank deposits and the credit they create hinges on how several key policy questions are resolved by Congress and regulators. Any level of stablecoin adoption will likely displace deposits and reduce credit to some degree - the question is how much. One unresolved policy issue that will determine the magnitude of stablecoins' effects on bank deposits: whether payment stablecoin issuers are permitted to pay interest, either directly or indirectly. The intention set forth by the GENIUS Act is that interest payments should be prohibited, but key market participants have argued that stablecoin issuers should be permitted to pay interest indirectly through arrangements whereby an affiliate of the issuer pays the holder yield in the form of a "reward" or similar interest substitute. This workaround would convert stablecoins into an investment product that would directly threaten U.S. bank deposits and the loans to business and consumers that those deposits currently fund. Policymakers should align the letter and spirit of the interest payment prohibition through regulations implementing the GENIUS Act and statutory language in market structure legislation to prevent evasion and subsequent disruptions to credit in the real economy.

Things to Watch Next Week

• The House Financial Services Committee will hold a hearing on deposit insurance on Tuesday.
• The Exchequer Club holds a lunch event with senior House Financial Services Committee member Rep. Andy Barr (R-KY) on Wednesday.
• Sen. Mike Rounds (R-SD), a member of the Senate Banking Committee, delivers remarks on AI and financial services at the FinRegLab AI Symposium on Thursday.

Five Key Things

1. BPI Endorses U.S. Government Effort to Dismantle Transnational Fraud and Scam Networks

The U.S. Attorney for the District of Columbia launched a Scam Center Strike Force on Wednesday to aggressively crack down on crypto-facilitated fraud and scams originating from Southeast Asia. The task force aims to protect American consumers by deploying the collective resources of the U.S. Departments of the Treasury, Justice and State, as well as U.S. federal law enforcement, to eradicate transnational facilities and services used to exploit unsuspecting victims.

Heather Hogsett, BPI Executive Vice President and Head of BITS, issued a statement: "We strongly support the launch of the Scam Center Strike Force and stand ready to support this vital effort. American consumers are under attack from sophisticated criminal networks and hostile nation-states to the tune of over $12 billion per year - a sum that's likely underreported. Confronting this threat requires the full force of both industry and government, and today's announcement marks a significant step forward in that fight."

About one in five Americans has lost money to an online scam or attack, according to the Aspen Institute. These incidents contributed to $12.5 billion in reported consumer losses in 2024, per the FTC, a 25% annual increase from the previous year. Sophisticated criminal networks and nation-state actors originate most of these activities, running their illicit operations out of Southeast Asia to evade detection and industrialize illicit activities. The Scam Center Strike Force will partner with the host countries to identify criminal networks, seize facilities and hold criminal actors accountable.

The Scam Center Strike Force is one of many activities underway to address the surge in fraud and scam activities affecting everyday Americans. The Aspen Institute recently launched a National Strategy to Prevent Scams, reflecting input from over 80 organizations, including banks, technology companies and other affected sectors.

In addition to the Aspen Institute's efforts, BPI has called on social media and telecommunication companies to take a bigger role in preventing scams on their networks and partnering with banks to combat fraud and scams, given that these activities originate on these platforms. For example, one recent Reuters report found that one-third of all successful U.S. scams involve Meta and about 10% of Meta's 2024 revenue came from ads for scams and banned goods.

BPI's Recommendations:

1. Social media platforms should verify advertisers to stop scams before they originate and quickly take them down once fraud is reported.
2. The FCC and FTC should require telecom, social media and messaging app companies to monitor their networks and proactively notify victims.
3. Banks should be given a safe harbor to intervene when necessary to protect customers.
4. Congress and regulators should encourage and empower telecom providers, social media, messaging platforms and financial institutions to share data and information related to fraud and scams by creating a safe harbor to mitigate legal uncertainty about liability and antitrust concerns.
5. The U.S. government should establish a National Anti-Scam Strategy to prioritize prevention strategies and align accountability.

To learn more, please click here.

2. Congress Reauthorizes Cyber Sharing Law Temporarily as Shutdown Ends

Congress reauthorized a critical cyber threat information-sharing law temporarily in the continuing resolution bill signed into law this week, which reopened the federal government after the recent shutdown. The action comes after the protections expired on Sept. 30. But the law - the Cybersecurity Information Sharing Act (CISA) of 2015 - will only be reauthorized through the end of January, barring legislation to extend it permanently. BPI has emphasized the need to reauthorize these crucial protections, which enable banks and other critical infrastructure firms to share threat information with each other and the government without fear of legal liability.

3. Merchants, Card Networks Reach Settlement Agreement

Visa and Mastercard this week announced a revised $38 billion settlement agreement with merchants, which had sued the card networks accusing them of violating antitrust laws, including by charging overly high interchange fees. If approved by the court, the settlement would end two decades of litigation on the subject. The settlement agreement would, among other things, require Visa and Mastercard to lower the fees by 0.1 percentage point for five years, allow merchants to choose whether to accept U.S. cards in specific categories (including commercial cards, premium consumer cards such as rewards cards and standard consumer cards) and expand merchants' ability to impose surcharges on certain credit cards. The Electronic Payments Coalition expressed support for the settlement in a statement.

4. Kennedy Endorses Hill FDIC Nomination

Sen. John Kennedy (R-LA) expressed support for the nomination of Acting FDIC Chair Travis Hill as the permanent head of the agency, clearing a hurdle to Hill's confirmation. Kennedy said he is satisfied with progress on the agency's sexual harassment issues. The Banking Committee member had expressed concern about the issue during Hill's nomination hearing on Oct. 30 and had said he may not vote for Hill's confirmation.

5. The Crypto Ledger

Here's the latest in crypto.

• Market Structure Bill Draft Released. Sens. Cory Booker (D-NJ) and John Boozman (R-AR) have circulated a discussion draft of crypto market structure legislation, according to Punchbowl News this week. This draft represents only the Agriculture Committee portion, with the Banking Committee portion not yet released. The release is a starting point for negotiations, but open questions remain on key issues, according to Punchbowl.
• Coinbase Departs Delaware for Texas. Coinbase Chief Legal Officer Paul Grewal announced in a Wall Street Journal op-ed this week that the company is leaving Delaware and reincorporating in Texas, citing "efficiency and predictability, in part thanks to recent corporate-law reforms that enhance governance flexibility and legal predictability."
• CFTC Nominee Heads for Hearing Next Week. CFTC nominee Mike Selig, currently chair of the SEC's Crypto Task Force, will receive questions from lawmakers next week at a Senate Agriculture Committee nomination hearing.

In Case You Missed It

Data Sharing, Master Accounts, Stablecoins: BPI's Baer Joins Philly Fed Panel

BPI President and CEO Greg Baer participated in a panel this week at the Federal Reserve Bank of Philadelphia's Ninth Annual Fintech Conference alongside the NCUA's Kyle Hauptmann on the evolving relationship between banks and fintech. The panel was moderated by Davis Polk's Meg Tahyar. It was a lively affair; some highlights:

• Open Banking. Discussing the Chopra CFPB's Section 1033 rule, which governs consumer-authorized financial data sharing, Baer noted that a thriving open banking ecosystem existed before the current rule was proposed and has since expanded - driven by consumer demand. The question thus is not whether customers can share their bank data with fintechs or aggregators - over 100 million already do so - but whether those firms can harvest the data on a continuous basis while owning no liability, no responsibility for customer service, and paying nothing for it: "I don't think any of you are checking your account balance 10,000 times a month," Baer said. "That's a fintech or an aggregator harvesting that data and selling it." Baer predicted that in light of recent BPI litigation success, banks and fintechs would have time to continue negotiating API agreements that safeguard customer data while still allowing sharing of information. Liability in data sharing is an important issue, said Kyle Hauptmann on the panel. If a bank gives the fintech access to data, that fintech "should be liable for it, and liable not just in a strictly legal sense, but it is their name that gets to the consumer," he said.
• Deposits, Credit Cards, Stablecoins. Baer described the potential market for stablecoins across three dimensions: retail versus wholesale; US versus non-US; and means of exchange versus store of value as a use case. He noted that best use case appears to be as a store of value for individuals in foreign countries with hyperinflation or a threat of capital controls; on the other hand, he expressed skepticism that large dollar payments, FX transactions, or securities settlement would ever rely on a stablecoin at risk of depegging; also, he noted that in the former two cases, there were considerable liquidity benefits from netting rather than a RTGS/atomic settlement approach. He noted that US retail payments will be a battle, as stablecoins will have to offer benefits to offset the three main benefits of credit card use (float, rewards and charge-back rights). Panelists also discussed the limited operating hours of the payments landscape in the U.S. and the resulting inefficiencies. "This country, as advanced as we are, still is a little creaky when it comes to payment," Hauptmann said.
• Master Accounts. The Fed's proposed "skinny" master account is an answer to two main objections to fintechs getting access to a full master account, Baer observed - the "backdoor CBDC" that would be created by paying interest on reserves without a cap, and the credit risk to the Fed posed by access to overdrafts and the discount window without supervision and capital or liquidity requirements. He expressed concern about the potential of such caps being lifted and the overdraft ban being lifted under stress. He suggested that fintechs wanting access to the discount window and payment rails could simply become a bank.

Policy Uncertainty, AI: What the Fed Flagged in its Financial Stability Report

The Federal Reserve late last week published its semiannual Financial Stability Report, which examines key risks to the financial system. Here are a few highlights.

• Resilient Banks. The report noted that "[t]he banking system remained sound and resilient, with historically high regulatory capital ratios, though fair value losses on fixed-rate assets were still sizable for some banks." Banking system liquidity was also strong, with stable funding, large amounts of high-quality liquid assets and reliance on uninsured deposits "well below recent peaks."
• Risk Survey Takeaways. The key risks cited as concerns in a New York Fed survey of professionals at broker-dealers, banks, investment funds, and advisory firms were mostly factors external to the financial system, such as geopolitical risk, policy uncertainty, persistent inflation and artificial intelligence. Private credit markets were cited as a concern more frequently than in the previous survey, according to the Fed. "Respondents noted the opacity of private credit as contributing to uncertainties over potential negative spillovers, which could include impacts on banks in the event of credit stress or the failure of a nonbank financial institution," the report said. The report also indicated that conditions in commercial real estate markets are stabilizing, although risks remain.
• Closer Look. To read the full report, click here.

CFPB Proposes New Rules on Small Business Lending, ECOA

The CFPB this week issued two new proposals, one on small business lending data under Section 1071 of the Dodd-Frank Act and one amending the scope of Regulation B, which implements the Equal Credit Opportunity Act, a fair lending statute.

• Small Business Lending. The CFPB issued a proposal to revise its Section 1071 rule on small business lending data in an effort to streamline requirements and reduce complexity. The proposal would limit the scope of requirements for gathering small business lending data, in line with this goal. "The statutory purposes of the rule are not well served by an expansive rule that could create disruptions in small business lending markets," the CFPB said in its proposal. In comments on an initial proposal in 2022, BPI recommended that the CFPB follow seven guiding principles that would improve the rule and promote small business lending, including that the size threshold for scoping small businesses should be simplified; permitting banks to collect and report applicant provided-data without verification in all circumstances; and limiting the non-statutory data points that banks must collect and report. "A rule that is relatively simple to implement will promote industry compliance and encourage applicants to provide the requested data voluntarily by limiting the friction of the collection process and mitigating privacy concerns," BPI stated in its recommendations. BPI also recommended that the CFPB tailor the rule's scope and coverage and ensure that the collection and reporting of accurate and reliable data is comparable across a broad range of businesses and lending products.
• Disparate Impact. The ECOA proposal would provide that ECOA does not authorize disparate impact claims, as well as clarify a prohibition on discouraging prospective applicants and establish new limits on special purpose credit programs

Traversing the Pond

Here's the latest in international banking policy.

• BoE Proposes Stablecoin Regime. The Bank of England this week proposed a regulatory framework for sterling-denominated "systemic" stablecoins, publishing a consultation paper that seeks public comment until Feb. 10, 2026. The FCA will oversee non-systemic stablecoins. The consultation sets out terms for the mix of assets backing stablecoins and proposes holding limits for stablecoin holders, until the "transition no longer poses risks to the provision of finance to the real economy." The holding limits were shaped by the BoE's analysis of stablecoins' effects on bank deposit outflows and financing to the economy. The BoE is also considering central bank liquidity arrangements to support systemic stablecoin issuers in times of stress, according to the proposal.
• Breeden Gives Context on Stablecoin Requirements. The BoE proposal would require stablecoin issuers to hold at least 40 percent of their backing assets with the Bank of England in unremunerated deposit accounts. In a Reuters interview published this week, Bank of England Deputy Governor Sarah Breeden explained that this proposed requirement, which was 100 percent in an earlier proposal, is grounded in historical experience of stress events such as the 2023 collapse of Silicon Valley Bank and Circle's subsequent "depegging." "Look at what happened with SVB, with Circle - those numbers are broadly in line with that. That's why we're proposing 40% rather than a smaller number," Breeden said.
• Parliament Votes on Climate Reporting Measure. The European Plenary Parliament voted this week in favor of reducing climate reporting duties and due diligence requirements for companies. The vote was 382 in favor, 249 against and 13 abstentions. The measure would require only businesses employing on average over 1,750 employees and with net annual turnover of over €450 million to conduct social and environmental reporting and sustainability reporting under taxonomy rules. The reporting standards would be further simplified and reduced. In addition, due diligence requirements would apply only to large companies with more than 5,000 employees and a net annual turnover of over €1.5 billion.
• ECB Imposes First Climate Risk Fine. The European Central Bank this week imposed its first climate risk-related fine on Spanish bank Abanca Corporacion Bancaria SA. The penalty on the bank for temporarily not complying with a requirement for conducting a "materiality assessment" of its climate-related and environmental risks amounted to €187,650 ($217,000), according to the ECB.
• IOSCO Publishes Report on Tokenized Assets. The International Organization of Securities Commissions published a report this week highlighting the risks and implications of tokenized assets. While the ecosystem is "still nascent" for tokenization, there is growing interest among market participants in this technology, the report found. Most risks associated with tokenization conform to existing risk categories, but the technological nature and unique aspects of tokenization may present novel risks, the report suggested, such as complexities in legal ownership of tokens or operational risks like cyberattacks

JPMorgan Launches JPM Coin Deposit Token

JPMorgan Chase has begun rolling out a deposit token called JPM Coin to institutional clients, Bloomberg reported this week. The token represents dollar deposits at JPMorgan and allows users to send and receive money via public blockchain Base, enabling payment processing in seconds and 24/7. The move comes as additional BPI member banks are expanding their footprint in digital asset.