Bank of America CEO Warns of Stablecoin Threat to Banking System
During the latest earnings call, Bank of America CEO Brian Moynihan raised concerns that interest-bearing stablecoins could trigger a major shift of funds away from traditional banks. Research suggests up to $6 trillion in deposits could be at risk of moving into these digital assets.
How Stablecoins Could Disrupt Traditional Banking
Moynihan explained that interest-bearing stablecoins could function similarly to money market funds, investing primarily in cash, central bank reserves, or short-term government bonds instead of funding loans.
This shift could reduce bank deposits and weaken lending capacity. Small and medium-sized businesses, which rely heavily on bank loans, could face higher financing costs, affecting overall economic growth.
Potential Impact on the Financial Landscape
- Bank funding base faces pressure
- Lending capabilities could be constrained
- Loan costs might rise
This emerging trend calls for regulators and financial market participants to explore solutions that maintain the stability and fairness of the financial system.