Stablecoins Hit $284B – Are Banks Really at Risk? Analysts Weigh In

The global stablecoin market has crossed $284 billion in circulation, reviving a long debate about whether the growth of stablecoin poses a real threat to traditional banks or simply reflects a new layer of financial infrastructure evolving alongside them.

That question took center stage this week after historians and economists Niall Ferguson and Manny Rincon-Cruz argued that fears of bank destabilization are overstated, even as banking groups intensify their opposition to stablecoin rewards.

In an opinion piece published by Bloomberg, Ferguson and Rincon-Cruz framed stablecoins as fundamentally different from volatile crypto assets such as Bitcoin.

While speculative tokens behave more like financial derivatives, they argued, fiat-backed stablecoins function as payment instruments whose growth has accelerated following the passage of the U.S. GENIUS Act last summer.

The legislation established the first comprehensive federal framework for payment stablecoins, limiting reserves to cash, bank deposits, and short-dated U.S. Treasuries, while prohibiting issuers from making loans or paying interest directly to tokenholders.

Since the law took effect, the stablecoin sector has expanded quickly.

Banks Sound Alarm as Stablecoins Expand Beyond Payments

Treasury Borrowing Advisory Committee data cited in the opinion piece showed that fiat-backed stablecoins have surpassed $284 billion, dominated by Tether’s USDT and Circle’s USDC, which together account for more than 90% of the supply.

The payments, trading liquidity, and demand for cross-border settlements are projected to reach between $2 trillion and $3 trillion in the market by 2028, as cited by Treasury officials.

Banks, however, have pushed back, as industry groups have warned that stablecoins, particularly when paired with rewards offered by exchanges or platforms, could draw deposits away from the banking system.

The American Bankers Association and the Bank Policy Institute have argued that large-scale migration of deposits would raise banks’ funding costs and reduce credit availability/

JPMorgan executives have referred to interest-bearing digital dollars as the establishment of a parallel banking system that lacks the same levels of protection.

The push by banking lobbyists to change the proposed CLARITY Act, an expanded crypto market structure bill, provoked resistance by crypto companies and led to delays in Senate hearings.

Coinbase Chief Legal Officer Paul Grewal publicly rejected claims that stablecoin rewards threaten financial stability, saying there is no evidence of systemic risk and that competition should not be conflated with instability.

History Tells a Different Story on Stablecoins and Banks

Ferguson and Rincon-Cruz countered the banks’ narrative by turning to history.

They said that stablecoins were more like bank notes than deposits, and that historically, notes and deposits increased together, as opposed to crowding out.

They referred to some statistics indicating that since the introduction of the USDC in 2018, American bank deposits have grown by over $6 trillion, while stablecoins increased by roughly $280 billion, and both have been increasing in the same direction.

They observed that stablecoin rewards are not new and have not caused deposit flight even in times when banks were paying close to no interest.

The same sentiments were recently reiterated by the Circle CEO, Jeremy Allaire, in Davos at the World Economic Forum.

Allaire rejected speculations that a stablecoin reward might disrupt banking, asserting that it was the same as loyalty programs provided in regular finance.

Data support the scale of stablecoin usage beyond speculation. Global stablecoin transaction value reached $33 trillion in 2025, up 72% year-over-year.

USDC processed $18.3 trillion in payments, while USDT handled $13.3 trillion.

The International Monetary Fund has acknowledged the efficiency gains stablecoins offer in cross-border payments, while cautioning about risks in emerging markets and the need for regulatory coordination.

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