What New Forms of Money Could Mean for Deposits, Payments and Bank Funding
A Future Banking Economics examination of liability architecture, reserve design, customer flows, funding quality and strategic choice.
The strategic question is not whether stablecoins grow. It is which banking economics change under which stablecoin architecture.
Stablecoins are often discussed as a payments innovation, a cryptocurrency development or a regulatory question. For banks, none of those descriptions is sufficient.
The more consequential issue is what happens when a new privately issued form of money begins competing for economic functions that have historically been performed by bank deposits.
A customer who converts a bank deposit into a stablecoin has not simply changed the technology through which money is represented. Depending on how the stablecoin is structured, where its reserves are held and how the customer subsequently uses it, the transaction can alter the composition of bank liabilities, the price and stability of funding, the ownership of payment flows, the distribution of liquidity across institutions and potentially the amount of credit the banking system can support.
The economic effects are not uniform. If stablecoin reserves are held primarily as deposits with commercial banks, deposits may remain within the banking system but move from millions of relatively granular retail and corporate accounts towards a much smaller number of large institutional balances controlled by stablecoin issuers. If the reserves are held primarily in government securities, the consequences depend partly on who sells those securities and how settlement occurs. If stablecoins are purchased using cash rather than existing deposits, bank balance sheets can move differently again. If a foreign-currency stablecoin substitutes for deposits in an emerging economy, domestic banks can lose funding even though the holder continues to own an economically equivalent amount of foreign currency.
This is why the simplistic proposition that stablecoins will either replace bank deposits or have no effect because the reserves come back to banks is inadequate. Both outcomes are possible, and so are several others.
The banking question is not merely whether stablecoins grow. It is what form of money they become, what assets stand behind them, where those assets sit, what customer balances finance their acquisition, and which economic functions migrate with the money.
That is the starting point for understanding stablecoins through Future Banking Economics.
Stablecoins Are Still Small, but the Economic Question Is Becoming Larger
Stablecoins remain modest compared with the deposit base of the global banking system. Their market capitalisation was approximately USD 320 billion at the end of May 2026, while bank deposits are measured in trillions. Their current use also remains heavily concentrated in the digital-asset ecosystem. The BIS estimates that annual stablecoin transaction volume reached approximately USD 28 trillion in 2025, although volumes adjusted for transactions between wallets controlled by the same party are considerably lower and real-economy payments remain a small part of overall usage. Around 98 percent of stablecoins are denominated in US dollars.
Those numbers can support two very different conclusions. The first is that stablecoins remain too small to matter materially to most banks today. The second is that a financial instrument does not need to rival the banking system in aggregate before it begins altering the economics of particular customer segments, payment corridors, currencies or institutions.
The second interpretation is more useful strategically. Stablecoin market capitalisation grew by more than 50 percent during 2025, according to Federal Reserve research, and regulatory frameworks are becoming more formal in several important jurisdictions. The United States enacted a federal framework for payment stablecoins in July 2025, while the European Union already governs stablecoins through MiCAR. At the international level, however, regulatory implementation remains uneven. An FSB review found significant gaps and inconsistencies in the implementation of global stablecoin recommendations, particularly across jurisdictions, creating continued scope for regulatory arbitrage and fragmented oversight.
The strategic implication is not that mass adoption is inevitable. It is that the range of plausible economic outcomes has widened enough that bank leadership should understand the transmission mechanisms before those mechanisms become financially material.
Stablecoins should therefore be analysed neither as an existential threat nor as an irrelevant crypto instrument. They should be analysed as a potential liability architecture change.
The Deposit Is More Than Money Held for a Customer
To understand the banking implications, leadership first needs to remember what a deposit represents economically.
A customer deposit is simultaneously a monetary asset for the customer and a liability for the bank. For the customer, it provides liquidity, payment capability, safety, convenience and sometimes interest. For the bank, it can provide comparatively stable funding, transaction activity, customer information, relationship depth and an economic foundation for lending and other balance-sheet activities.
This distinction becomes important when a stablecoin replaces part of the deposit. The customer may still possess a highly liquid monetary asset denominated in the same currency. From the customer’s perspective, very little may appear to have changed. From the bank’s perspective, however, the economics can change considerably.
The bank may no longer owe the liability directly to the customer. It may no longer observe the same transaction flows. It may lose part of the operating balance. It may no longer control the payment interface. Its funding could return indirectly through a stablecoin issuer rather than directly through the original depositor. That replacement funding may be larger, more concentrated, more rate-sensitive and potentially more mobile.
The form of money can therefore change while the nominal amount of money appears unchanged. This is why stablecoins belong inside the deposit franchise discussion developed in Volume I. The relevant question is not only whether deposit balances remain. It is whether Deposit Economic Quality remains.
The Reserve Architecture Determines Much of the Banking Effect
Stablecoins do not create one universal balance-sheet outcome because reserve architectures differ.
A fiat-backed stablecoin typically promises redemption into a reference currency and holds assets intended to support that promise. Those reserve assets can include bank deposits, short-duration government securities, reverse repurchase agreements and other highly liquid instruments, depending on the regulatory regime and issuer structure.
The economic consequence for banks depends heavily on where those reserves ultimately sit. The BIS has described three particularly important reserve possibilities for the emerging stablecoin system: wholesale bank deposits, short-term government securities and, under some potential institutional structures, central bank reserves. Each creates a different relationship with the banking system.
Consider the first case. A household moves USD 10,000 from a bank account into a stablecoin. The stablecoin issuer places the USD 10,000 into another commercial bank. At the level of the banking system, the deposit has not necessarily disappeared. But economically, something important has changed. A relatively granular retail deposit has become part of a large institutional deposit controlled by a stablecoin issuer.
The deposit has been recomposed. This matters because wholesale deposits held by stablecoin issuers can behave differently from retail deposits. They are likely to be more concentrated, more professionally managed, more sensitive to market rates and potentially capable of moving rapidly during periods of stress. The banking system can therefore retain the same nominal amount of deposits while suffering a deterioration in funding quality.
That is a very different economic problem from straightforward deposit loss.
Stablecoins Can Redistribute Deposits Without Destroying Them
This leads to one of the most important distinctions in the stablecoin debate. Deposit displacement is not the same as deposit destruction.
If stablecoin reserves remain inside commercial banks, stablecoins can redistribute deposits across institutions rather than eliminate them from the banking system. That redistribution can still matter enormously.
Retail deposit losses could be dispersed across hundreds or thousands of banks, while the corresponding reserve deposits of a few major stablecoin issuers could become concentrated among a smaller number of institutions perceived to be sufficiently large, liquid or operationally capable of servicing those issuers.
The aggregate banking system could therefore retain much of the funding while individual banks experience very different outcomes. The ECB has already observed this concentration dynamic beginning at small scale. Deposits from crypto exchanges and stablecoin issuers at euro area banks rose from below EUR 1 billion in 2024 to more than EUR 6 billion by mid-2025, although those balances remained small relative to the institutions concerned.
A bank should not ask only whether stablecoins reduce deposits in its market. It should ask whether customer money migrates into stablecoins, where the resulting reserve balances return, on what terms, with what stability, and to which banks.
Stablecoins may create deposit concentration winners and losers even before they create system-wide disintermediation.
The Source of Funds Matters as Much as the Reserve Asset
Reserve composition alone is not sufficient. Leadership also needs to know what the stablecoin buyer gives up in order to acquire the stablecoin.
If the customer converts an existing bank deposit, the initial effect is different from a customer who converts physical cash. If an emerging-market customer converts a domestic-currency deposit into a US-dollar stablecoin, the consequences differ from a customer converting an existing US-dollar deposit. If stablecoins are acquired predominantly for crypto trading, the banking implications differ from widespread adoption for payroll, merchant settlement or corporate treasury.
This is why stablecoin economics should be analysed through a matrix rather than a single forecast. One axis is the source of funds. The other is the destination of reserves. Depending on their design and reserve management, stablecoins could redistribute deposits within the banking system, reduce bank balance sheets or, in some cases, even expand them.
Banks should therefore avoid preparing for a generic stablecoin future. They should identify the specific stablecoin adoption pathways that would matter to their own liability structure.
Bancly’s Liability Architecture Exposure
Volume I introduced Structural Economic Position as a way of understanding the durability of the bank beneath current financial performance. Volume II requires a complementary concept for examining structural forces.
For stablecoins, Bancly defines Liability Architecture Exposure as the degree to which the economic quality, composition, cost and strategic value of a bank’s liability base depend on monetary arrangements that could be altered by the emergence of new forms of money.
This is broader than deposit outflow risk. A bank can have high Liability Architecture Exposure even if total deposits remain broadly stable.
That exposure can arise through at least six channels. Funding Migration occurs when customer balances move partly outside the bank. Funding Recomposition occurs when retail balances return as institutional reserve deposits. Funding Concentration occurs when stablecoin reserve balances accumulate at a smaller number of banks. Funding Repricing occurs when depositors require more competitive remuneration because alternative monetary instruments make liquidity more portable. Flow Migration occurs when payment and transaction activity moves with the monetary instrument, weakening transaction primacy. Currency Migration occurs when domestic deposits shift towards foreign-currency stablecoins, changing the currency composition and potentially the location of financial intermediation.
Together these determine whether stablecoin adoption matters economically to a particular bank.
The Real Deposit Risk May Be Repricing Before Outflow
One of the most important lessons from the deposit-franchise analysis in Volume I is that a franchise can weaken before balances leave. Stablecoins reinforce that possibility.
A credible, highly liquid alternative form of money can influence depositor behaviour even if customers continue keeping most of their money with banks. The existence of another easily accessible monetary instrument can reduce inertia.
Customers may become more willing to split liquidity across providers. Corporate treasury departments may manage operating balances more actively. Digital wallets may make movement between deposits, tokenised money and other short-duration assets increasingly frictionless.
The bank can therefore retain the customer while paying more to retain the balance. This is an important distinction because deposit economics are often discussed through volume. The first financial transmission could instead occur through deposit beta. The balance remains while the franchise economics weaken.
Stablecoin remuneration makes this issue more important. MiCAR prohibits stablecoin issuers and crypto-asset service providers from paying interest on stablecoin holdings in the European Union, partly limiting their attractiveness as savings substitutes. In other markets, however, third-party platforms can construct remuneration mechanisms around stablecoin holdings. BIS research published in June 2026 found that centralised exchanges already use different models to remunerate stablecoin holders, potentially making stablecoins behave more like bank deposits, cash-management instruments or money-market products.
The strategic question is therefore not simply whether the stablecoin itself pays interest. It is whether the stablecoin ecosystem can manufacture an economically competitive return around the token.
Payments Could Move Before Funding Does
Stablecoin adoption can also affect banks through a channel that has little to do initially with deposit balances: payments.
A customer can retain a bank account while increasingly using stablecoins for selected payments. A corporate customer could use stablecoins for cross-border settlement. A merchant could accept them through an external provider. A platform could integrate stablecoin payments directly into its customer interface.
The underlying bank relationship survives, but some transaction activity migrates. This matters because Volume I established that payments produce more than transaction fees. Payments generate operating balances, behavioural information, customer frequency, financial intent and relationship depth.
When payment flows move, part of the economic architecture around the deposit can move with them. Stablecoins therefore connect Deposit Economic Quality and Customer Economic Primacy. The liability can remain with the bank while the flow becomes less valuable. Eventually, the flow migration can make the liability less durable.
This is why payment displacement can precede deposit displacement.
Reserve Assets Create a Second Balance-Sheet Transmission
There is another reason stablecoins are not merely a payments topic. Large stablecoin issuers have become significant holders of short-duration government securities.
The BIS reported that reserve portfolios of major fiat-backed stablecoins are heavily concentrated in dollar assets and that their holdings of Treasury bills have reached levels comparable with those of large jurisdictions and government money-market funds.
That creates a second banking transmission mechanism. Imagine that deposits move into stablecoins and the issuer invests the proceeds in Treasury bills. If the bills are purchased from a non-bank investor, the seller may receive a bank deposit in exchange, causing much of the deposit funding to remain within the banking system but redistribute. If the stablecoin issuer purchases securities directly from a bank, however, the bank can experience balance-sheet contraction as both assets and deposits change.
The liquidity implications can also depend on which securities banks hold and whether banks need to replace lost high-quality liquid assets. The important conclusion is that reserve management is part of banking economics.
A stablecoin market with USD 500 billion of reserves invested primarily in commercial-bank deposits would have a different banking effect from a USD 500 billion market invested primarily in government securities. The token may look identical to the user. The bank economics would not be.
Stablecoins Could Change Credit Without Becoming Lenders
Stablecoin issuers do not need to become conventional lenders to influence bank credit.
If the banking system loses access to cheap, stable deposit funding and replaces it with more expensive wholesale funding, banks’ marginal funding cost can rise. That can affect credit pricing.
Banks can absorb part of the increase through lower margins. They can pass it into loan pricing. They can change asset allocation. They can reduce lending. Which response occurs will depend on competition, capital, liquidity and the strength of individual institutions.
Federal Reserve analysis published in December 2025 similarly identified deposits, credit provision and financial intermediation as central channels through which wider stablecoin adoption could affect banks.
Stablecoins do not need to perform maturity transformation themselves to affect the economics of maturity transformation performed by banks. They need only alter the liability structure that makes bank lending economically attractive. The transmission is deposit economics -> marginal funding economics -> lending economics -> credit supply and pricing.
This is why stablecoins ultimately belong in the CEO conversation. They can reach the asset side through the liability side.
The Emerging-Market Economics Are Different
The banking implications become more complex in economies where stablecoins provide access to a foreign currency that users already perceive as a superior store of value.
A US-dollar stablecoin in a highly dollarised or financially fragile economy does not compete only with a domestic bank account. It can compete with the domestic currency itself.
The IMF has highlighted this distinction. Where stablecoins substitute for physical US dollars, the macroeconomic consequences can be limited. Where they draw funds from foreign-currency deposits held at domestic banks and the stablecoin reserves are subsequently invested abroad, domestic banks can lose funding that would otherwise support local foreign-currency lending. The IMF has also cautioned that clear evidence of widespread bank disintermediation has not yet emerged, which is important because the risk should not be presented as an established outcome.
This is precisely why an economic framework is more useful than a universal narrative. Stablecoin exposure is market-specific.
A highly banked advanced economy with credible domestic money, deposit insurance and easy access to yielding financial products presents one set of adoption economics. An economy with currency instability, capital controls, high remittance dependence or limited access to US-dollar financial products presents another. A bank operating across both markets should not have one stablecoin thesis. It should have several.
Regulation Will Influence the Liability Architecture
The eventual banking impact will also depend materially on regulation.
Reserve requirements determine where stablecoin backing can sit. Rules on remuneration affect whether stablecoins compete primarily as payment instruments or increasingly as savings instruments. Redemption requirements influence liquidity management. Bank access rules influence where reserve deposits can be held. Cross-border restrictions affect whether stablecoin reserves remain within the domestic financial system or migrate abroad.
The European model provides a clear example. Under MiCAR, stablecoin issuers must hold a significant proportion of reserves as deposits with credit institutions, with requirements of at least 30 percent and higher requirements for significant stablecoins. The policy is partly designed to strengthen redemption capacity, but it also creates direct interconnections between stablecoin issuers and banks.
The United States has taken a different approach through the GENIUS Act, which established a federal regulatory framework for payment stablecoins in 2025 and requires regulators to develop implementing rules around matters including reserves and redemption.
Globally, however, the FSB continues to find uneven implementation of stablecoin regulation. This matters economically because the stablecoin itself is portable while the regulatory architecture is national. That creates the possibility that the economic transmission of stablecoins crosses borders more easily than the regulatory frameworks intended to govern them.
Banks Have More Than Two Strategic Choices
The stablecoin debate is often presented as a binary choice between resisting stablecoins and issuing one. That is strategically immature.
Banks have several possible economic positions. A bank can remain primarily a deposit-money provider, investing in transaction primacy and ensuring that conventional or tokenised deposits remain compelling. It can become a reserve bank, holding stablecoin issuer reserves and providing cash management, settlement and liquidity services. It can become a distribution participant, enabling customers to access stablecoins while maintaining the broader banking relationship. It can provide on-ramp and off-ramp infrastructure, connecting deposit money with tokenised monetary systems. It can participate in tokenised deposit architectures, preserving bank-money economics while adopting programmable settlement technology. It can serve stablecoin issuers through transaction banking, custody, compliance, treasury and settlement services. It can also deliberately decide that some stablecoin-related economics are unattractive relative to the risk, capital and compliance requirements.
The correct strategic position will vary by bank. What matters is that the choice should be explicit.
A bank that refuses to participate should understand what customer, flow and funding economics it is protecting and what it may concede. A bank that participates aggressively should understand whether it is strengthening its franchise or simply helping another monetary architecture scale.
The question is not whether the bank should do stablecoins. It is what economic position the bank should occupy if stablecoins become materially more important.
Stablecoins and Tokenised Deposits Are Not the Same Economic Proposition
This distinction will become increasingly important.
A tokenised deposit remains a liability of a commercial bank. A stablecoin issued by a non-bank represents a claim on a different issuer backed by a reserve pool. Both can use distributed-ledger technology. Both can potentially support programmable payments and settlement. Their banking economics are nevertheless different.
Tokenised deposits can preserve the relationship between deposit creation, bank funding and bank credit intermediation. Stablecoins can separate the monetary instrument from the bank’s balance sheet.
For bank leadership, this means the competitive response to stablecoins should not automatically be a bank-issued stablecoin. The more fundamental question is which monetary architecture allows the bank to preserve the economic functions it values.
That could include tokenised deposits. It could include stablecoin infrastructure. It could include interoperability between both. The technology should follow the economic position rather than define it.
A CEO Stablecoin Economics Scorecard
Stablecoins should therefore enter executive strategy through a small number of economic questions rather than a broad discussion about digital assets.
The first is Source of Funds: which customer balances could plausibly move into stablecoins, and what economic value is attached to those balances today?
The second is Reserve Destination: where would the money supporting those stablecoins ultimately sit?
The third is Funding Recomposition: if retail deposits return as reserve deposits from issuers, how would stability, pricing and concentration change?
The fourth is Flow Ownership: would stablecoin adoption weaken transaction primacy even if balances remain?
The fifth is Currency Exposure: could stablecoins alter the currency composition or geographic location of funding?
The sixth is Strategic Position: what part of the future monetary architecture does the bank need to own economically, even if it does not own every component operationally?
The Questions at the Top Must Change
Boards do not need to become stablecoin specialists. CEOs do not need to forecast token adoption precisely. Banks do not need to reorganise themselves around every new digital monetary instrument.
What needs to change is the quality of the economic questions.
Instead of asking how large the stablecoin market might become, leadership should ask which parts of the bank’s liability architecture become economically vulnerable at different adoption levels.
Instead of asking whether deposits will leave the banking system, leadership should examine whether retail funding becomes wholesale funding, whether deposits concentrate among a smaller group of banks and whether funding quality changes before funding volume does.
Instead of asking whether stablecoins compete with cards or payment rails, the bank should examine whether they alter the flows that reinforce deposit stability, customer information and relationship economics.
Instead of asking whether a stablecoin should be issued, leadership should determine which monetary functions the bank needs to control and which can be provided through other institutions without weakening Customer Economic Primacy.
Instead of waiting for aggregate deposits to fall, management should monitor the behaviours that could eventually make those deposits less durable.
These are fundamentally banking questions. They belong with the CEO, CFO, treasury, strategy and board because they concern the economic architecture of the institution.
Stablecoins Are Becoming a Banking Economics Question
The most useful conclusion is not that stablecoins will replace banks. There is not enough evidence to support that proposition, and the financial system is unlikely to evolve through such a simple substitution.
Banks perform functions stablecoin issuers do not automatically replicate. They create credit. They transform maturity. They absorb risk. They provide regulated deposit money. They intermediate savings into productive assets. They maintain deeply embedded customer and corporate relationships.
Stablecoins do not need to replace those functions to matter. They need only change the monetary architecture around them.
A stablecoin can redirect a payment without replacing the bank account. It can change deposit behaviour without causing immediate deposit flight. It can transform a granular retail liability into a concentrated wholesale liability. It can move reserve assets towards government securities. It can alter the geographic location of foreign-currency funding. It can increase competition for customer liquidity. It can weaken transaction primacy. It can eventually raise marginal funding costs and change lending economics.
The correct economic question is therefore not whether stablecoins are good or bad for banks. It is which banking economics change under which stablecoin architecture.
That distinction matters because the next phase of monetary innovation will not be determined solely by the technology used to represent money. It will be determined by who issues the money, who holds the backing assets, who owns the customer relationship, who controls the payment flows, where liquidity accumulates and which institutions retain the economic capacity to intermediate those funds into credit.
Banks that understand those mechanisms early do not need to predict precisely how large stablecoins will become. They need to understand what must remain true for their existing liability architecture to remain economically attractive if stablecoins become substantially more important.
That is a much more governable question. It is also the question that belongs at the top.
