The stablecoin boom is gaining momentum, with the total market capitalization of these digital dollars surpassing $300 billion (recent estimates place it around $312 billion as of March 2026, reflecting roughly 50% year-over-year growth). Stablecoins like USDT and USDC, pegged to fiat currencies such as the US dollar, are increasingly used for payments, cross-border remittances, and crypto trading. This rise is prompting warnings from traditional finance about their potential to disrupt established banking models.

According to a new report from Jefferies, a global investment banking firm, the growing adoption of stablecoins is unlikely to cause a sudden "run" on US bank deposits—like the dramatic events seen in past banking crises. Instead, analysts describe a more gradual but persistent threat: stablecoins could slowly draw deposits away from traditional banks over time.

### Key Findings from the Jefferies Report

The report highlights how stablecoins function as convenient alternatives for holding and transferring value, particularly in digital payments and crypto markets. As users shift funds into these "digital dollars," banks may experience a 3% to 5% runoff in core deposits over the next five years.

This erosion would force banks to replace lost low-cost deposits with more expensive funding sources, such as wholesale borrowing or higher-interest instruments. The combined effects—including rising funding costs and potential pressure on fee income—could reduce average bank earnings by approximately 3%.

Jefferies analysts emphasize that this impact would be steady rather than catastrophic, but it represents a meaningful drag on profitability for the banking sector, especially if stablecoin usage continues to expand beyond niche crypto applications into mainstream payments.

### Broader Context in the Stablecoin Landscape

The stablecoin market has grown rapidly, now accounting for about 7–8% of the overall crypto market. Institutions like Visa, Mastercard, and some major banks are beginning to integrate stablecoins or tokenized deposits into their systems for faster settlements and cross-border efficiency. However, this integration also underscores the competitive tension: while stablecoins offer speed and low friction, they challenge banks' traditional role as primary holders of consumer and business deposits.

The debate ties into ongoing regulatory discussions in the US, including concerns over whether stablecoins should be allowed to offer yield (interest-like returns), which could accelerate deposit shifts. Banking groups have argued that such features pose risks to financial stability and credit availability, as banks rely on stable, low-cost deposits to fund loans to businesses and households.

For now, the Jefferies analysis paints a picture of evolution rather than revolution in banking—stablecoins are reshaping parts of the financial ecosystem, but traditional lenders still hold significant advantages in regulation, trust, and breadth of services. Banks may need to adapt by enhancing their own digital offerings or partnering with blockchain technologies to mitigate these pressures.

This report adds to a growing chorus of voices in finance highlighting how digital assets are quietly influencing the fundamentals of traditional banking. As the stablecoin market matures, its interplay with legacy systems will likely remain a key watchpoint for investors, regulators, and the industry at large.