The $300 billion digital dollar boom could eat into traditional banks' profits, warn Jefferies analysts
Jefferies analysts warn that the growing stablecoin market, reaching $300 billion, could reduce traditional bank profits by attracting deposits.Summary
A new report by Jefferies analysts indicates that the increasing use of digital dollars and stablecoins in payments and crypto markets may lead to a gradual outflow of deposits from traditional banks. While not an immediate threat, the analysts estimate a potential 3% to 5% core deposit runoff over the next five years, which could raise funding costs and decrease bank profitability. The growth of the stablecoin market, fueled by the GENIUS Act and expanding use cases like payments and cross-border transfers, is a key factor. The market cap has risen from $184 billion in 2022 to around $314 billion currently, and is projected to reach $800 billion to $1.15 trillion in the next five years. Banks like WTFC, FLG, WBS, EGBN, and AX, with high concentrations of retail deposits, are considered most vulnerable. Despite some mitigating factors, such as regulations limiting stablecoins as savings products and banks launching their own stablecoins, the long-term risk of activity-based rewards and DeFi integration remains a concern.
(Source：CoinDesk)