BofA’s Moynihan Warns Interest-Bearing Stablecoins Could Drain US$6T From Banks

• Moynihan said allowing stablecoin-linked yield could trigger large-scale deposit migration away from the banking system, weakening banks’ ability to extend credit.
• He said deposit migration would force banks to rely on higher-cost wholesale funding, pushing borrowing costs higher, particularly for smaller businesses.
• The comments come as US lawmakers debate crypto legislation, with yield on stablecoins a key unresolved issue.

Bank of America Chief Executive Brian Moynihan has warned that permitting stablecoin issuers to pay interest could draw up to US$6 trillion (AU$9.06 trillion) out of the US banking system, potentially reducing banks’ ability to lend and increasing borrowing costs.

Speaking during a Bank of America earnings call, Moynihan said Treasury-cited studies show a substantial share of bank deposits could migrate into stablecoins if interest-style returns are allowed. He said that when deposits leave banks, institutions either lose lending capacity or must rely on wholesale funding, which carries higher costs that are ultimately passed on to borrowers.

Moynihan compared interest-bearing stablecoins to money market mutual funds, noting that funds would likely be held in cash, central bank reserves or short-term US Treasurys rather than being used to support bank lending.

Such a shift would move deposits off bank balance sheets, shrinking the availability of credit, particularly for small and mid-sized businesses that depend more heavily on bank loans than capital markets.

Related: Bank of America Opens the Door to Crypto Allocations for Wealth Clients

Lawmakers Split over Stablecoin Interest

The warning comes amid stalled progress on US crypto legislation, after the Senate Banking Committee postponed consideration of a crypto market structure bill to allow for further negotiations. That delay followed a similar postponement by the Senate Agriculture Committee, which pushed its own markup of the bill to 27 January.

Debate over whether stablecoin issuers or distributors should be permitted to offer yield has emerged as a central point of contention in congressional negotiations. Banking groups have argued that yield-bearing stablecoins resemble unregulated investment products and risk displacing deposits that fund traditional lending.

Moynihan said Bank of America itself would adapt to customer demand, but warned that the broader banking system could be harmed if trillions of dollars migrate into stablecoin-linked products.

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