We picture a bank keeping our money in a vault. In reality, it lends it: that is how it funds the neighbor's house and the corner business. A stablecoin does the opposite: it circulates like money but lends nothing. This dossier follows a quiet shift: when money stops passing through the bank, it is credit to the real economy that wavers — and a tool billed as a mere means of payment silently redraws who funds what.
1 What a bank really does
A useful reminder: a bank is not a vault.
A useful reminder
It turns deposits into loans
We readily imagine the bank filing our deposits away in a strongroom. In truth, it lends them out. Its business is intermediation: it collects liquid deposits, available at any moment, and turns them into long-term loans — a mortgage, a firm's working capital, a farmer's investment. This is "deposit transformation": a few euros left in a checking account, pooled with millions of others, fund the credit of a whole economy. The bank does not lend the money it owns; it lends the money entrusted to it, and in doing so it creates credit. Remove the deposits, and that credit contracts.
2 The money that doesn't lend
The contrast: money that circulates but funds nothing.
The contrast
Fully backed, it makes no loans
A stablecoin is a digital currency pegged to the dollar, backed by a reserve of safe assets — cash and short-term Treasury bills. The US GENIUS Act, enacted in July 2025, set this framework: a payment stablecoin must be 100% backed. That prudence carries a decisive flip side: unlike a bank, the issuer does not lend what is entrusted to it. Money that enters a stablecoin goes to buy government debt, not to fund the local small business. It circulates, it pays, but it leaves the credit circuit. It is money without a bank — and therefore without a loan.
3 When money starts to pay
The tipping point: from means of payment to rival of the deposit.
The tipping point
Interest banned… yet skirted
As long as a stablecoin only serves to pay, it mainly competes with cash and bank transfers. But once it pays a return, everything changes: it becomes a direct rival of the bank deposit. The GENIUS Act saw this and bars the issuer from paying interest. Only, the rule is skirted: exchanges that "reward" holding, tokens backed by money market funds, and various arrangements offer yield through the side door. A bank deposit, meanwhile, pays almost nothing. Facing a "money" as liquid as a checking account but paid like an investment, the saver is tempted to move. The stablecoin ceases to be a means of payment and becomes a substitute for the bank account.
4 The deposit flight
The drain: estimates that give pause.
The drain
Up to a quarter of deposits
What happens if this yield becomes widespread? Deposits leave the banks. The US Treasury put the figure, in an April 2026 report, at up to $6.6 trillion in potential outflows, depending on whether yield is allowed. A White House study estimates a deposit loss of about 25.9% in a scenario where stablecoins pay a competitive return. A quarter of banks' funding evaporating: this is no longer an adjustment, it is a bleed of the bank balance sheet.
Deposit outflows, high end
$6.6tn
per the US Treasury (April 2026), if yield is permitted.
Deposits lost (scenario)
~25.9%
in a competitive-yield case (White House study).
5 Credit dries up
The real consequence: Main Street on the front line.
The real consequence
Fewer deposits, fewer loans
Since deposits fund loans, their flight dries up credit. The same work puts at roughly $1.5 trillion the lending capacity erased in the harshest scenario, including $110 billion in small-business loans and $62 billion in farm credit. It is not the global banking giants that suffer most, but the local banks — the community banks — that fund "Main Street": shops, farms, tradespeople. They live on local deposits; when those evaporate into a digital token, it is the local economic fabric that loses its financier.
Lending capacity erased
~$1.5tn
in the yield scenario (White House study).
Of which Main Street
$110bn
in small-business loans, plus $62bn in farm credit.
6 The liquidity stress
The hidden effect: a shock transmitted to the system.
The hidden effect
Disintermediation "through liquidity"
The threat is not only slow. The Federal Reserve Bank of New York, in a 2026 report, documents a more brutal channel: disintermediation "through liquidity." Stablecoins are issued and redeemed en masse, around the clock; banks that host their issuers' deposits face violent payment swings and must hold vast reserves to cushion them. They then operate more "narrowly" — more liquidity buffer, fewer loans — and their loan share contracts relative to peers. The liquidity shock of a single token is thus transmitted to the entire banking system.
7 Déjà vu: the money funds
The perspective: history rhyming.
The perspective
An old story, in digital form
Nothing entirely new. In the 1970s and 1980s, money market funds emptied US banks the same way: regulation capped deposit rates (the famous "Regulation Q"), while these funds offered a market yield. Savers fled, banks had to pay more to keep the money, and credit grew dearer. The Federal Reserve itself draws the parallel: stablecoins are the digital version of an old phenomenon, disintermediation. Knowing the precedent is to know that the risk is real — but also that the banking system survived it, by adapting.
8 Where the money migrates
The shift: two points of concentration.
The shift
A few issuers, and Treasury bills
Where does the money that leaves the banks go? Toward two points of concentration. First, a handful of giant stablecoin issuers, capturing deposits once scattered across thousands of local institutions. Second, Treasury bills: since every stablecoin must be backed by government debt, its growth pours a massive demand onto the state's securities. Money concentrates, and the state's dependence on these new buyers grows. Power shifts, quietly: from local banks toward a few private players, and toward funding the deficit. The apparent dispersion of a "decentralized" currency ends, in practice, in a new concentration.
9 The debate: innovation or capture
Both camps: each with a point.
Both camps
Protect Main Street, or unseat a rentier?
The subject divides, and honestly. On one side, banks and their trade groups (the Bank Policy Institute, the American Bankers Association) call for closing the yield "loophole": letting stablecoins pay, they say, would drain local credit and weaken small banks. On the other, the crypto industry sees the self-serving defense of an entrenched rentier: why should the bank alone decide whether the saver is paid? Handing a return to the holder, it argues, gives back to the public a purchasing power that banks have captured for decades through near-free deposits. Both have a point: one defends local financing, the other competition and the consumer.
10 Limits and nuance
The right measure: neither miracle nor apocalypse.
The right measure
A policy choice, not a fate
Two excesses must be avoided. The first would be to sanctify the bank: disintermediation is not in itself a catastrophe, it can lower costs and widen access to financial services, and advocates of "narrow banking" (fully reserve-backed) even see in it a safer system, immune to runs. The second would be to take extreme scenarios for prophecies: estimates range from $65 billion to over $1.2 trillion in lost credit, depending on the yield allowed and the regulation chosen — the spread signals the uncertainty. Finally, everything will depend on the rules: the GENIUS Act can be tightened, yield framed, banks adapt as they did against money funds. The danger is not written; it is a collective choice.
11 Who funds the economy?
The close: behind a stable token, a choice of society.
The meaning of the paradox
A means of payment that redraws the credit circuit
At bottom, the question goes beyond the technical. A tool presented as a mere means of payment redefines, without saying so, the credit circuit: it diverts savings from local lending toward government debt and a few issuers. The right question is therefore not "should there be stablecoins?" — they exist and render real services — but "do we want credit to remain intermediated by banks rooted in their territory, or a growing share of money to lie dormant in Treasury bills, out of reach of the small business and the farm?" Behind a stable token lies a choice of society: to whom do we entrust the financing of the real economy?
The compass
①
A bank turns deposits into loans. Deposited money funds lending to the real economy: that is intermediation. Remove the deposits, and credit contracts.
②
A stablecoin does not lend. Backed by Treasury bills, it pulls money out of the credit circuit; once it pays yield, it becomes a deposit substitute and triggers the flight.
③
Local credit is on the front line. Small businesses, farms and community banks pay the price, while money concentrates in a few issuers and in government debt. This sheet sets out a debate; it is not advice.
Read alongside: When the saver repays the debt without knowing it and The 'sidelined' cash that waits for nothing. Reference: abbreviations & acronyms (Fed, SME, GDP).