Stablecoin Growth May Raise Bank Loan Costs

Bank for International Settlements (BIS) chief Pablo Hernández de Cos warned that the rapid expansion of stablecoins could push up borrowing costs for banks. As digital assets become a core payments tool, they challenge traditional bank business models and may force banks to redesign products and funding strategies.

Stablecoins as a Competitive Payments Product

The stablecoin market now holds roughly $304 billion, led by Tether (about $183 billion) and USDC (about $74 billion). Federal Reserve researchers note that these tokens can act as competitors to traditional transaction accounts. Arthur Firstov of Mercuryo explained that stablecoins have moved from a niche crypto product to a mainstream payments instrument used for treasury, cross‑border settlement, card payments, merchant payouts and institutional settlement.

Bank Responses and New Liability Structures

Banks are exploring stablecoin and digital‑asset initiatives. A Federal Reserve survey indicated that about half of respondents plan to grow in at least one stablecoin area over the next three years. Examples include JPMorgan’s JPM Coin, which represents a bank deposit on a blockchain, and Société Générale‑FORGE’s CoinVertible, a MiCA‑regulated stablecoin backed by segregated collateral.

Nitin Gaur of Nethermind highlighted the legal and capital differences between tokenized deposits and bank‑issued stablecoins. Under the U.S. GENIUS Act, payment stablecoins must be backed one‑to‑one by eligible reserves such as cash or short‑dated Treasuries, creating a non‑lendable reserve pool distinct from traditional deposits.

Potential Impact on Funding Costs

Adrian Wall of the Digital Sovereignty Alliance warned that if stablecoin adoption draws funding away from bank deposits without recycling it back into the banking system, banks could face higher funding costs and reduced credit capacity.

Real‑World Use Cases

• Citi used a tokenized‑deposit service for a dollar payment from London to Thailand over a U.S. holiday weekend.
• Western Union launched USDPT, a stablecoin issued on Solana by Anchorage Digital Bank.
• JPMorgan reports about $7 billion in daily activity across its Kinexys products.
• CoinVertible disclosed €156.6 million of euro tokens and $12.55 million of dollar tokens outstanding as of August 31.

Cooperative Stablecoin Initiatives

In Europe, Qivalis is coordinating 37 banks across 15 countries to develop a shared euro‑denominated stablecoin, targeting a launch in the second half of 2026 pending regulatory approval. The goal is to avoid fragmented liquidity across multiple bank‑specific tokens and create a deep, interoperable on‑chain euro payment rail.

The success of such cooperative models will depend on whether banks can generate sufficient ancillary services—such as foreign‑exchange and corporate lending—to offset any higher funding costs associated with stablecoin‑backed reserves.