ABA: Interest-bearing stablecoins may trigger $6.6T deposit flight

The American Bankers Association (ABA) warns that interest-bearing stablecoins could cause massive deposit flight from U.S. banks, citing a 2025 Treasury estimate of up to $6.6T in outflows. ABA disputes a White House/CEA paper that projected only a small net $2.1B change in bank lending. Instead, ABA says the core risk is funding migration: deposits could shift from community banks to larger institutions. That could raise funding costs for smaller lenders, push them toward more expensive wholesale borrowing, and ultimately reduce credit availability. ABA economists Sayee Srinivasan and Yikai Wang frame the “live policy concern” around whether interest-bearing stablecoins will drain deposits from smaller banks even if total system liquidity looks unchanged. The debate is now central to negotiations on a pending U.S. Senate crypto regulation bill, where negotiators flag the legality of stablecoin yield payments as a major obstacle. Coinbase CEO Brian Armstrong has argued interest-bearing stablecoins would force fairer competition versus banks paying near-zero deposit interest. For crypto traders, this is a policy-driven variable that can affect stablecoin demand and broader risk sentiment around regulation—especially if the Senate bill clarifies or restricts interest-bearing stablecoins.