It was a moment that silenced the room. Speaking at the Economic Club of New York on Tuesday, Bank of America CEO Brian Moynihan dropped a bombshell that sent ripples through the financial establishment: the burgeoning yield on stablecoins could siphon off more than a third of all US bank deposits within the next five years. “If we don’t adapt, we’re looking at a 35% outflow of consumer deposits into crypto-based yield products,” Moynihan said, adjusting his glasses as the audience of bankers and regulators shifted in their seats. “That’s not a prediction. That’s a math problem.”
The numbers are stark. According to data from DeFi Llama, the total market cap of stablecoins has swelled past $160 billion, with yields on platforms like Aave and Compound offering annual percentage rates (APRs) between 4% and 12% — far above the average 0.4% annual percentage yield (APY) on US savings accounts. For a banking sector already grappling with deposit flight after the Silicon Valley Bank collapse in 2023, this warning lands like a thunderclap.
The Stablecoin Threat
Stablecoins — digital tokens pegged to fiat currencies like the US dollar — have evolved from obscure crypto tools into mainstream financial instruments. Tether (USDT) and USD Coin (USDC) dominate, together accounting for over 85% of the market. But the real game-changer is the yield. Unlike traditional bank deposits, which earn negligible interest in a low-rate environment, stablecoin holders can stake their tokens on decentralized finance (DeFi) protocols and earn double-digit returns.
Moynihan’s warning isn’t theoretical. He cited internal BofA models showing that every 1% increase in stablecoin yields relative to bank savings rates triggers a 2.5% outflow of deposits from U.S. commercial banks. With current gaps exceeding 5 percentage points, the 35% drain estimate becomes plausible. “We’ve already seen a 12% decline in small-bank deposits since 2022,” noted Dr. Sarah Chen, a crypto economist at the University of Pennsylvania’s Wharton School. “The stablecoin yield premium is accelerating that trend.”
Bank of America itself holds over $1.9 trillion in deposits, but Moynihan acknowledged that retail customers — especially those under 40 — are increasingly parking cash in crypto wallets. “We’re losing a generation of depositors,” he said. “They see 5% on a stablecoin and wonder why they earn pennies at the bank.”
The Yield Gap
To understand the threat, look at the numbers. As of March 2025, the average US savings account yields 0.42% APY, per the FDIC. Meanwhile, USDC held on Compound Finance yields 5.8% APY; USDT on Aave offers 6.2%. Even after factoring in transaction fees and volatility risks, the net return is 10 to 15 times higher. That gap is widening as the Federal Reserve holds rates steady while DeFi protocols adjust supply-demand dynamics.
“This is not about crypto replacing banks overnight. It’s about the slow, steady leak of the most profitable deposits — the ones that cost banks next to nothing to hold.” — Michael Torres, senior banking analyst at Keefe, Bruyette & Woods
Torres points out that banks rely on low-cost deposits to fund loans and generate net interest income. A 35% deposit drain would force banks to either raise deposit rates — crushing their margins — or shrink lending, which could choke the broader economy. “If banks have to pay 4% on deposits just to keep them, mortgage rates could spike 200 basis points,” he added. “That’s a contagion risk.”
Regulators are waking up. The SEC under Chair Gary Gensler has proposed rules requiring stablecoin issuers to hold 100% reserve backing, but those rules remain stalled in Congress. Meanwhile, the Banking Committee’s stablecoin bill, the Lummis-Gillibrand Payment Stablecoin Act, would mandate a 1:1 reserve requirement and prohibit algorithmic stablecoins — but it hasn’t passed yet.
Regulatory Reckoning
Moynihan’s speech comes days after the OCC issued a guidance warning banks about “run risk” from stablecoin-linked deposit outflows. The agency estimates that a coordinated shift of 10% of retail deposits into stablecoins could trigger a liquidity crunch similar to 2023’s regional banking crisis. “We’re in a race against time,” said former FDIC chair Sheila Bair in a follow-up interview. “Either regulators cap stablecoin yields or they force banks to offer competitive products. You can’t have it both ways.”
Bank of America has not been passive. The bank launched a pilot program in November 2024 allowing select customers to earn 2.5% APY on tokenized deposits pegged to USDC. But Moynihan admitted the internal resistance is fierce. “Our own risk committee says it’s too experimental. Meanwhile, we’re losing $12 billion in deposits every quarter to Circle and Tether,” he said.
Smaller banks are even more vulnerable. Community banks, which hold 25% of all US deposits but lack the resources to build crypto bridges, could see outflows hit 50%. The Independent Community Bankers of America has already petitioned the Treasury for emergency intervention, but so far received no response.
What This Means for Your Money
For the average reader in the US, UK, or Canada, this isn’t just an abstract Wall Street debate. If Moynihan’s prediction holds, expect to see banks rapidly raising savings rates — but also slashing fees or requiring minimum balances to offset costs. “You’ll get 3% on your checking account by 2026, but you’ll pay $15 a month for it,” warned Emily Zhao, a consumer finance expert at NerdWallet Canada. “Banks are in a profit squeeze, and consumers will feel it.”
The flip side: stablecoin yields could democratize access to high returns. For underbanked populations in developing nations, stablecoins already offer a safe haven from hyperinflation. But the risk is systemic. A sudden drop in stablecoin confidence could trigger a bank run in reverse — money flooding back into deposits too quickly, destabilizing both systems.
Data from the Bank for International Settlements show that cross-border stablecoin flows now exceed $50 billion per month, equivalent to 8% of SWIFT traffic. “We’re building a shadow banking system in real time,” said former Treasury Secretary Larry Summers in a recent Bloomberg interview. “And we’re not managing the transition from old to new.”
Moynihan ended his speech with a call for action: “We need a regulatory framework that allows banks to offer stablecoin-yield products without cannibalizing our own balance sheets. Otherwise, we’ll just watch deposits walk out the door — and take the economy with them.”
The warning is clear. Over the next 12 to 18 months, expect a flurry of pilot programs from major banks, potential rate caps on DeFi yields from regulators, and a legislative push to classify stablecoin holding as a bank-like activity. For now, the math is simple: 35% of $18 trillion in US deposits — that’s $6.3 trillion — could vanish into code. Whether that’s a revolution or a catastrophe depends on who acts first.