Jefferies Analysts Warn Stablecoin Growth Could Cut Bank Profits by 3%: CryptoDailyInk

Stablecoins are not a "bank killer" overnight, but they are becoming a structural leak in the traditional banking bucket. Jefferies analysts project that the continued expansion of digital dollar assets could lead to a 3% to 5% runoff in core bank deposits over the next five years, ultimately shaving roughly 3% off bottom-line bank earnings as funding costs rise.

Why are stablecoins threatening traditional bank deposits?

For decades, banks have relied on cheap, sticky retail deposits to fund their lending operations. Stablecoins—cryptocurrencies pegged 1:1 to fiat currencies—are fundamentally changing this equation. By acting as high-velocity, 24/7 digital cash, they offer utility that standard checking accounts simply cannot match.

While the GENIUS Act restricts regulated issuers from paying yield to passive holders, the real threat isn't just interest rates—it's the ecosystem. As stablecoins integrate deeper into DeFi protocols and cross-border payment rails, they bypass the traditional banking infrastructure entirely.

The Data: How big is the stablecoin footprint?

The growth trajectory of the sector is impossible to ignore. According to DefiLlama, the sector has surged from roughly $184 billion in 2022 to over $314 billion today. Jefferies analysts forecast this market could balloon to between $800 billion and $1.15 trillion within five years.

As noted in recent coverage, banks are already feeling the heat, forcing them to pivot toward tokenized payment solutions to remain relevant.

Which banks are most at risk?

Not all lenders are created equal in the eyes of the digital dollar. Jefferies identified banks with heavy concentrations of retail and interest-bearing deposits as the most vulnerable.

• High Exposure: Institutions like WTFC, FLG, WBS, EGBN, and AX are flagged as the most exposed due to their retail-heavy deposit bases.