Stablecoin Growth Threatens to Drive Up Bank Loan Costs

Borrowing costs could climb as stablecoins gain ground, warned Bank for International Settlements chief Pablo Hernández de Cos on August 28, as lenders push into digital currencies.

These digital assets are becoming a tricky asset class for banks, threatening their business model and compelling them to roll out new products.

The stablecoin market now totals roughly $304 billion, with Tether at about $183 billion and USDC at $74 billion. A Federal Reserve study describes these tokens as possible rivals to traditional transaction accounts.

Arthur Firstov, Chief Business Officer at Mercuryo, explained the implications to BeInCrypto.

“Stablecoins stopped being a crypto product and became a payments product. For years banks could wave it off as ‘crypto infrastructure’ – that’s a much harder line to hold when stablecoins are being used for payments, treasury, cross-border settlement, cards, merchant payouts, and institutional settlement. At that point they’re competing directly with one of the most valuable products a bank has: the transaction account.”

Banks are responding. A September 2025 Federal Reserve survey found about half of respondents planned to prioritize growth in at least one stablecoin or digital-asset area over the next three years.

What Becomes of the Deposit?

J.P. Morgan's JPM Coin turns a bank deposit into a blockchain representation. Société Générale-FORGE’s CoinVertible is a MiCA-regulated stablecoin backed by segregated collateral. The same technology carries different promises for customers.

Nitin Gaur, Head of Institutions at Nethermind, explains the difference.

“The interesting question stopped being whether a bank can issue and became what a bank is issuing. A tokenized deposit and a bank-issued stablecoin are two different liabilities with different legal character, different capital treatment, different insurance status and different settlement properties.”

A tokenized deposit still counts as bank funding. The US GENIUS Act requires payment stablecoins to be backed at least one-to-one by eligible reserves, such as cash or short-dated Treasuries. The Treasury proposed implementation rules on August 17.

Gaur outlines what that could mean for a bank's balance sheet.

“A stablecoin issued under a GENIUS pathway is not a deposit. It is a payment instrument backed by segregated reserves the issuer cannot lend against. When a treasurer moves a hundred million from a demand deposit into the bank’s own coin, the bank has converted a funding source into a matched, non-lendable reserve pool,” Gaur said.

The broader effect depends on where reserves end up. Money that flows back to banks can still provide funding, though it may be more concentrated and quicker to leave.

Adrian Wall, Managing Director of the Digital Sovereignty Alliance, identifies the risk.

“If stablecoin adoption ultimately shifts funding away from bank deposits rather than recycling those funds back into the banking system, banks could face higher funding costs and potentially less capacity to extend credit.”

Around-the-Clock Payments

Customers already have reasons to use these products. In July, Citi reported a dollar payment from London to Thailand during a US holiday weekend, using its tokenized-deposit service alongside 24/7 clearing.

Western Union launched USDPT in May, with Anchorage Digital Bank issuing the stablecoin on Solana.

The models are growing at different scales. J.P. Morgan reports about $7 billion in daily activity across Kinexys products. CoinVertible had €156.6 million of euro tokens and $12.55 million of dollar tokens outstanding on August 31.

Those figures track transaction volume and circulating supply, respectively, so they cannot show which model is ahead.

37 Banks, One Coin

As more banks enter, separate coins could leave money scattered across smaller pools, with users needing to exchange one bank’s token for another. Technical connectivity does not guarantee conversion at face value during market stress.

Europe’s Qivalis has brought together 37 banks across 15 countries around a planned euro stablecoin. It aims to launch in the second half of 2026, subject to regulatory approval.

Ernesto Olmedo Pereira, Head of Strategy and DeFi at Qivalis, says sharing the currency is intentional.

“If every bank launches its own token, you get dozens of thin, incompatible pools instead of one deep, liquid euro instrument. Qivalis, an independent company backed by 37 banks, exists precisely because the banks behind it decided to build one shared, interoperable euro rail together rather than compete with 37 separate ones.”

Banks could then compete through services wrapped around that money, such as foreign exchange and corporate lending. The shared coin would carry payments between them.

Qivalis’s launch will test whether that cooperation can attract regular business beyond its founding banks.

Customers need money they can use across banking relationships. Banks will have to show that the services sold around those payments justify any higher cost of funding their loans.