CryptoSlate
A $100 stablecoin purchase looks harmless to the banking system: your bank loses your deposit, the issuer parks the dollars in its own account, and the total is unchanged. A BIS 2026 analysis and Fed research argue the accounting misses the point. The money comes back with a different owner, one that can move the entire balance with a single redemption decision, and that shift from sticky retail funding to demanding wholesale funding makes bank balance sheets costlier to run.
The mechanics run through liquidity rules. Under the Basel Liquidity Coverage Ratio, a bank with $120 million of qualifying liquid assets against $100 million of estimated 30-day net outflows sits at a comfortable 120%. If the customer mix shifts toward large issuer-style accounts and estimated outflows rise to $110 million, the same assets produce a ratio near 109%, even though nothing has actually been withdrawn. Restoring the buffer can force the bank into more liquid assets or longer-term funding, both of which carry a price that can surface in loan rates.
Why it matters
The debate over stablecoins has largely fixated on headline forecasts of trillions leaving bank deposits. The BIS framing, pushed by General Manager Pablo Hernández de Cos in an August speech, is that reserve composition matters more than supply: dollars spent on Treasury bills flow to whoever sells the bill, dollars paid to the Treasury return via government spending, and only purchases of securities held by banks shrink system deposits outright. National totals can look stable while individual lenders, especially smaller ones, lose dependable local funding and find the replacement account lands at a bigger competitor.
Market impact
Banks are not powerless. They can pay more interest, improve payments, or adopt tokenized deposits that keep the customer relationship on the bank's own balance sheet, and the Fed's Sept. 24 proposals now set reserve and risk-management rules for supervised payment stablecoin issuers. None of the BIS examples prove lending has already been cut; that would require evidence from individual loan books. But if banks must compete harder for funding that was once cheap and boring, the cost of credit for households and businesses, including those with no exposure to stablecoins, is the channel to watch.
Frequently asked questions
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Do stablecoins actually drain dollars from the banking system?
Often not. When an issuer parks your dollars in its own bank account or buys a Treasury from a nonbank seller, the deposit stays in the system. What changes is the owner of that deposit, from a retail customer to a large institutional holder.
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How can stablecoins make lending more expensive if deposits stay?
A deposit's value to a bank depends on how dependable it is. Large issuer accounts can be withdrawn in one decision, which raises estimated outflows under liquidity rules and can force banks to hold more liquid assets or pricier longer-term funding.
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What is the Liquidity Coverage Ratio and how does it apply?
The LCR, part of the Basel framework, compares assets a bank can quickly turn into cash with estimated net outflows over 30 days of stress. The BIS example shows a bank at 120% falling to about 109% purely from a shift in customer mix, with no withdrawals.
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What did BIS general manager Pablo Hernández de Cos say about reserves?
In an August speech he put reserve composition at the center of the banking effects, arguing the route the backing takes, whether bank deposits, existing Treasuries, new government debt, or bank-held securities, determines the impact, so token supply forecasts alone cannot predict lending outcomes.
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How can banks respond to competition from stablecoins?
Options include paying more interest, improving payment services, issuing tokenized deposits that keep the customer on the bank's balance sheet, or launching their own stablecoins under the Fed's Sept. 24 proposal rules for supervised issuers.
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