Bank of America CEO Brian Moynihan issued a warning during a Wednesday earnings call, stating that as much as $6 trillion in deposits could potentially exit the U.S. banking system in favor of stablecoins. This massive migration would represent approximately 30% to 35% of all U.S. commercial bank deposits, a projection Moynihan attributed to recent Treasury Department studies. The core of the concern lies in a legislative dispute regarding whether stablecoins should be permitted to bear interest, which could fundamentally alter the composition of commercial bank liabilities and reduce the capital available for traditional lending.
Moynihan explained that the current structure of stablecoins mirrors that of money market mutual funds, where reserves are typically held in short-term instruments such as U.S. Treasurys. Unlike traditional bank deposits, these funds are not recycled back into the economy through loans to households and businesses. The CEO cautioned that if a significant portion of the deposit base sits outside the traditional system, banks will be forced to turn to wholesale funding to maintain their operations. This shift would inevitably increase costs for financial institutions, ultimately limiting their ability to provide affordable credit to the public.
These remarks arrived at a critical moment as the Senate Banking Committee faces a deadline-driven push to finalize a crypto market structure bill. A recent proposal by Chair Tim Scott includes a provision that would prohibit digital asset service providers from paying interest or yield to users for simply holding stablecoins, though it would still allow for activity-based rewards like staking. The legislative process has become increasingly contentious, with over 70 amendments filed and intense lobbying efforts coming from both the banking sector and the cryptocurrency industry.
The political landscape surrounding the bill is further complicated by demands from Democratic lawmakers for stricter ethics provisions. These calls follow reports estimating that President Donald Trump’s family cryptocurrency ventures have generated hundreds of millions of dollars. Additionally, privacy concerns have surfaced, with Galaxy Research suggesting that the proposed legislation could expand financial surveillance authorities to levels not seen since the USA PATRIOT Act due to new Treasury Department powers over digital transactions.
The mounting friction led to a major setback on Wednesday when Coinbase CEO Brian Armstrong announced that the exchange could no longer support the bill, citing provisions that he believes would effectively eliminate rewards for stablecoin holders. Following this withdrawal of industry support and the sheer volume of unresolved disputes, Senator Tim Scott announced that the scheduled committee markup would be postponed. Despite the delay, Scott indicated that negotiations are ongoing and that all parties remain engaged in an effort to reach a resolution.
