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Bank chiefs rarely volunteer a number as large as six trillion dollars unless they want lawmakers to stop and listen. Bank of America CEO Brian Moynihan did exactly that when he warned that stablecoin deposits could pull huge sums away from the banking system if the rules allow stablecoins to pay something that looks like interest.
His point was not that Bank of America is unprepared. He said the bank will compete and meet customer demand. The worry is what happens to credit when deposits migrate into tokens that are designed to sit in cash and short-term government paper instead of funding loans.
On Bank of America’s latest earnings call, an analyst asked what happens if lawmakers fail to close a perceived loophole that could let stablecoin deposits pay interest indirectly. Moynihan said studies referenced by Treasury suggest “upwards of” $6 trillion in deposits could flow from bank liabilities into a stablecoin environment.
That headline number matters because deposits are not just a funding line item. They are the cheap, sticky fuel that lets banks lend to households and businesses at scale. When deposits leave, banks either lend less or replace that funding with wholesale markets that typically cost more and can disappear faster under stress.
The political friction is not really about stablecoins existing. It is about stablecoins becoming a yield and rewards product at a time when many consumers earn very little on checking and basic savings, while short-term rates still look attractive elsewhere.
That is why the debate has gravitated toward a simple question with big consequences. Should stablecoin deposits be allowed to offer passive yield for simply holding the token, or should rewards be limited to real activity like payments and loyalty programs.
In plain English, most regulated stablecoin proposals push issuers toward high-quality liquid backing such as cash equivalents and short-term government securities. Moynihan compared the structure to something close to a money market concept, where the assets sit in safe instruments rather than being lent out to businesses.
That is the transmission mechanism behind the fear. If stablecoin deposits scale by pulling funds from the banking system, the backing assets may concentrate in Treasuries and similar instruments. The banking system then has less capacity to expand credit, particularly in segments that cannot tap bond markets cheaply.
Moynihan argued the pain would land most heavily on small and mid-sized businesses because they rely far more on bank loans than on capital markets. Large issuers can sell bonds. Many local employers cannot.
This is also why the loudest warnings have come from trade groups that represent broad banking interests. The fight is not only about megabanks. It is also about community and regional banks that depend on deposits to fund relationship lending.
Lawmakers have been trying to draw a bright line. Stablecoins can be used as a payments technology, but they should not recreate a deposit product outside the normal bank rulebook.
Recent federal proposals have discussed restricting interest that is paid purely for holding a stablecoin while still permitting incentives tied to activity such as payments or loyalty programs. The details matter because the market will route around vague language.
Even if an issuer is barred from paying yield directly, distribution channels can change the economics. Exchanges, platforms, and affiliates can offer “rewards” that effectively mimic interest. If that remains legal, stablecoin deposits could compete head-on with bank deposits as a store of value product, not just as a settlement tool.
If lawmakers close those paths, stablecoins may still grow, but the growth path likely looks more like payments and treasury management, and less like a mass retail yield sweep.
The irony is that traditional finance is not sitting out the stablecoin era. Major payment networks and banks have been exploring settlement using stablecoins, and several large institutions have signaled interest in issuing their own compliant tokens once the rule set is clear.
So the end state is not simply banks versus crypto. A more realistic end state is banks, card networks, and regulated issuers competing on rails while regulators decide whether stablecoin deposits are allowed to behave like an interest product.
Stablecoins are no longer a niche corner of trading. Circulating supply is now measured in the hundreds of billions of dollars, and transaction volumes have become large enough that policymakers treat stablecoins as a payments and financial stability topic, not just a crypto topic.
For readers building a framework, it helps to separate three use cases. Payments settlement, trading liquidity, and “cash management” behavior where users hold tokens as a yield substitute. The policy battle is mainly about the third use case.
If you are trying to trade this narrative, focus on incentives and plumbing, not slogans. The fastest way to grow stablecoin deposits is to make holding them feel like holding a high-yield cash product. The fastest way to slow that growth is to limit passive yield and force rewards to be tied to genuine payment activity.
Watch three indicators as this story develops. First, the final language on rewards and affiliates. Second, whether regulated banks launch their own stablecoin products for corporate clients. Third, whether payment networks expand stablecoin settlement beyond pilots into scaled merchant flows.
If you want context on how policy and infrastructure connect, see our explainer on SEC crypto regulation and our overview of US crypto regulations. For the stablecoin market’s expansion into major venues, our coverage of USDC liquidity partnerships is a useful reference point. For how rewards and compliance debates spill into trading and derivatives, read our piece on USDC collateral and the GENIUS Act debate. For a European angle on compliant issuance, see MiCA-compliant euro stablecoins.
Bank of America earnings call transcript and analyst Q&A, Reuters reporting on stablecoin policy debates and payments adoption, Bloomberg reporting on stablecoin transaction volumes, and banking trade group commentary on the interest and rewards loophole discussion.
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