The discussion around stablecoins and deposit substitution is becoming more nuanced — and more quantitative. At the system level, the numbers are still clear. U.S. commercial bank deposits are roughly $18.5 trillion, while the global stablecoin market is about $275–280 billion. That puts stablecoins at ~1.5% of the deposit base by level — a reminder that this is not a story about wholesale displacement of deposits today.
Where the conversation gets more interesting is how deposits could evolve, rather than whether they disappear.Recent Federal Reserve research highlights that stablecoins can affect deposits in three distinct ways:
- Direct substitution, where funds move from bank deposits into stablecoins whose reserves are held outside the banking system
- Recycling, where deposits remain in the system but shift toward stablecoin issuers or wholesale balances
- Restructuring, where the mix, stability, and concentration of deposits change even if aggregate levels do not
In that framing, the composition of deposits matters more than the headline total. Transactional balances are generally viewed as more exposed than savings balances, given stablecoins’ core use case in payments and settlement. Even modest adoption can be locally material if it concentrates in specific customer segments, industries, or institutions.
It’s also helpful to anchor this discussion against an existing benchmark. Money market funds now hold nearly $8 trillion, far exceeding stablecoins in scale. Deposit substitution is therefore not a new phenomenon — what’s new is the programmable, 24/7 nature of stablecoin rails, which changes how and when liquidity can move.
A simple sizing thought experiment illustrates the point. If stablecoin supply were to grow by $200 billion, and even half of that growth were funded by bank deposits, the system-wide impact would be well under 1% of total deposits. Small in aggregate — but potentially meaningful for funding mix, liquidity assumptions, and balance-sheet optionality where exposures are concentrated.
The takeaway isn’t that stablecoins are an immediate threat to deposits. It’s that deposit stability is increasingly conditional, shaped by usage, rate sensitivity, and the availability of alternatives — including digital ones. For ALM, liquidity risk, and funding discussions, this shifts the focus from levels to behavior.
Arnab Pandey 