The growing adoption of stablecoins is unlikely to have a significant impact on community banking despite fears it could prompt major outflows, according to new research shared first with The Hill.
Stablecoins — cryptocurrencies tied to assets, like the U.S. dollar, to maintain a more stable price — are primed for expansion after President Trump signed the GENIUS Act into law earlier this month.
The bill, which created a regulatory framework for payment stablecoins, prompted concerns from community bankers.
In a letter to the Senate in May, the Independent Community Bankers of America (ICBA) warned that people could shift their money out of community banks and into stablecoins, in a move that "would create a cascade of issues."
ICBA ultimately cheered several changes to the final legislation that reached Trump's desk, including a prohibition on interest-bearing stablecoins and restrictions on the ability of nonfinancial public companies to issue the dollar-backed digital tokens.
However, new research from Charles River Associates, commissioned by Coinbase, found "no evidence of a material funding risk" from stablecoin adoption on community banking.
"The results reveal no statistically significant relationship between USDC adoption and community bank deposit outflows," the report noted.
It pointed to several factors:
- Community bank deposits and stablecoin demand could be driven by "unobservable common factors"
- There may be limited overlap between community bank customers and stablecoin adopters
- Shifts in returns on other types of assets could result in outflows from both bank desposits and stablecoins
"Even under an unlikely, model‑free assumption that every dollar invested in stablecoins reduces deposits one‑for‑one, the projected hit to community banks is modest: 6.8 percent in an extreme stablecoin adoption scenario and below one percent under our baseline adoption scenario," the report said.
In a separate report using its own data, the Coinbase Institute similarly found that community bank customers do not significantly overlap with stablecoin adopters.
"We believe it is important to understand that stablecoins
are not replacing traditional banking—they are enhancing it," it wrote.
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