Bank of America CEO Brian Moynihan has issued a stark warning, projecting that up to $6 trillion in deposits, constituting approximately 30% to 35% of all U.S. commercial bank deposits, could migrate from the traditional banking system into stablecoins. This potential shift hinges on Congress permitting interest payments on digital tokens under pending legislation.
Banking Chief Flags Deposit Flight Risk
Moynihan addressed investors during Bank of America's fourth-quarter earnings call, referencing Treasury Department studies to substantiate his forecast. He indicated that a significant portion of bank deposits could move to stablecoins if these digital tokens are authorized to generate interest.
The banking sector has voiced considerable criticism of the GENIUS Act, a landmark U.S. stablecoin legislation, for months. The proposed framework prohibits interest payments on payment-purpose stablecoins but currently applies this restriction only to issuers. Critics argue that this distinction creates significant regulatory gaps.
Multiple banking associations have formally communicated their concerns to the Senate Banking Committee, urging Congress to extend the prohibition on interest payments to digital asset exchanges, brokers, dealers, and other related entities.
Moynihan drew a parallel between stablecoins and money market mutual funds, which typically hold reserves in short-term instruments such as U.S. Treasuries.
"If you move it outside the system, you'll reduce the lending capacity of banks," Moynihan stated during the call. He further elaborated that such a shift would compel institutions to face higher wholesale funding costs, which would ultimately translate into increased borrowing rates for consumers.
Moynihan assured that Bank of America itself would be able to withstand such a deposit migration. However, he highlighted that small- and medium-sized businesses would likely bear the most significant impact, as they are primarily reliant on bank lending for their operations.
Industry Opposition Mounting
This warning comes at a time when the Senate is grappling with a broader market structure bill that has already encountered strong opposition from leaders within the cryptocurrency industry.
Coinbase CEO Brian Armstrong has publicly stated that the company cannot support the current draft of the bill, asserting that "this version would be materially worse than the current status quo."
Armstrong's concerns encompass several key areas, including a potential de facto ban on tokenized equities, significant restrictions on decentralized finance, an erosion of the Commodity Futures Trading Commission's authority, and policies that would prevent interest payments to passive stablecoin holders.
"We'd rather have no bill than a bad bill," Armstrong commented.
The draft legislation would permit stablecoin issuers to offer rewards for specific actions, such as account openings and cashback incentives. However, it strictly bars interest payments to passive token holders. Armstrong contends that this provision "would kill rewards on stablecoins" and would effectively allow banks to "ban their competition."
Senate Banking Committee Chairman Tim Scott announced on Wednesday that the markup session for the bill had been postponed. A new date for this session has not yet been announced.
White House crypto and AI czar David Sacks commented on the situation, suggesting that the bill's passage "remains as close as it's ever been" and urged the industry to utilize the pause to resolve outstanding differences.