Interest-Bearing Stablecoins Spark Alarm: Bank of America CEO Warns of $6 Trillion Banking Exodus

In a stark warning that underscores the deepening clash between traditional finance and digital assets, Bank of America CEO Brian Moynihan has raised the alarm about a potential $6 trillion shift away from the U.S. banking system. The catalyst, according to a recent earnings call discussion, is the emergence of interest-bearing stablecoins. This development, emerging in early 2025, places immense pressure on lawmakers as they grapple with stalled cryptocurrency legislation and its profound implications for the American financial landscape.

Bank of America CEO Issues $6 Trillion Stablecoin Warning

During a quarterly earnings call, Bank of America’s Brian Moynihan pointed directly to a systemic risk. He cited internal and Treasury-cited studies suggesting yield-bearing stablecoins could attract trillions in bank deposits. Moynihan framed these digital assets not as simple payment tokens but as high-tech competitors to money market mutual funds. Consequently, funds held in these stablecoins would reside in cash, central bank reserves, or short-term Treasuries. This structure fundamentally differs from traditional banking, where deposits fuel loans to businesses and consumers.

The CEO’s comments, later highlighted in a social media post by a crypto investor, quickly gained traction. Moynihan argued that large-scale deposit migration would directly reduce bank lending capacity. Subsequently, this contraction in credit availability would push borrowing costs higher for everyone. The warning arrives amid a critical period of regulatory uncertainty for digital assets in the United States.

The Regulatory Stalemate and Legislative Delays

Moynihan’s warning did not occur in a vacuum. It coincides with significant delays in Congress regarding comprehensive crypto market structure bills. For instance, the Senate Banking Committee recently postponed a markup of the pivotal CLARITY Act. Committee Chair Tim Scott cited a need for further bipartisan negotiations without providing a new date. Similarly, the Senate Agriculture Committee pushed its own markup to late January.

This legislative gridlock creates a precarious environment. Banking institutions and crypto innovators are now lobbying fiercely over the future framework. The core debate centers on whether stablecoin issuers or distributors should legally offer yield to holders. Banking groups assert these products function like unregulated investment vehicles. They demand clear rules to close perceived loopholes.

Community Banks Echo the $6 Trillion Concern

The American Bankers Association and the Community Bankers Council have amplified Moynihan’s concerns. In a January letter to lawmakers, the Council warned that up to $6.6 trillion in bank deposits could be at risk without strict restrictions. They emphasized that community banks, which rely heavily on deposits for lending, would be disproportionately affected. “If billions are displaced from community bank lending, small businesses, farmers, students, and home buyers in towns like ours will suffer,” the letter stated. It further argued that crypto exchanges and stablecoin companies are not designed to fill this lending gap nor offer FDIC-insured products.

Industry Division Over the CLARITY Act and Stablecoin Yields

The crypto industry itself is deeply divided on the legislative path forward, particularly regarding the CLARITY Act. Coinbase CEO Brian Armstrong publicly stated his company could not support the Senate Banking Committee’s current draft. He specifically criticized provisions that would “kill rewards on stablecoins,” calling it a move that allows banks to ban their competition. Armstrong adopted a hardline stance, stating, “We would rather have no bill than a bad bill.”

Conversely, other prominent voices urge progress despite imperfections. Chris Dixon, a managing partner at a16z Crypto, recently called advancing the CLARITY Act necessary for the U.S. to remain a leader in crypto innovation. This split highlights the complex balancing act for regulators: fostering innovation while maintaining financial stability and protecting consumers.

The Mechanics of the Threat: A Systemic Perspective

To understand the $6 trillion warning, one must examine bank balance sheets. Banks use customer deposits to create loans, generating profit from the interest rate spread. Stablecoins offering interest compete directly for these deposit dollars. If a saver moves money from a savings account to a yield-bearing stablecoin, that capital leaves the bank’s balance sheet. Over time, this shrinks the pool of money available for mortgages, small business loans, and credit lines.

Economists note that while the funds might still flow into short-term government debt, the intermediation function of banks is disrupted. Small and mid-sized enterprises (SMEs), which depend more on bank loans than large capital markets, would feel the tightest squeeze. This could potentially slow economic growth and innovation at the local level.

Historical Context and the Path of Financial Innovation

The tension between new financial technology and incumbent systems is not new. The rise of money market funds in the 1970s similarly challenged bank deposit bases, leading to regulatory adjustments. Today, blockchain technology and programmable digital assets represent the next frontier. Stablecoins, particularly, have evolved from simple payment rails to potential savings vehicles.

Regulators globally are taking varied approaches. Some jurisdictions, like the UK and the EU with its MiCA framework, are creating specific regimes for stablecoins. The United States, however, remains in a patchwork phase. The President’s Working Group report previously recommended that stablecoin issuers be insured depository institutions, a view aligning with traditional banking interests.

Conclusion

Bank of America CEO Brian Moynihan’s $6 trillion warning crystallizes a pivotal moment for American finance. The rise of interest-bearing stablecoins presents a legitimate challenge to traditional banking models by competing for core deposits. This threat has united banking groups in calling for strict regulations, even as the crypto industry remains divided on legislative details. The ongoing delays in Congress regarding the CLARITY Act and other crypto bills only heighten the uncertainty. The ultimate resolution will require balancing the undeniable innovation of digital assets with the proven stability and essential lending functions of the traditional banking system. The decisions made in 2025 will likely shape the financial landscape for decades.

FAQs

Q1: What are interest-bearing stablecoins?
Interest-bearing stablecoins are digital tokens pegged to a stable asset like the U.S. dollar that offer holders a yield or return, similar to a savings account or money market fund.

Q2: Why does Bank of America’s CEO say they threaten banks?
He argues they could pull trillions in deposits out of banks, reducing the funds available for lending to businesses and consumers, which would shrink credit availability and increase borrowing costs.

Q3: What is the CLARITY Act?
The CLARITY Act is proposed U.S. legislation aimed at creating a regulatory framework for digital assets. Its current draft in the Senate is controversial, partly due to provisions affecting stablecoin yields.

Q4: How are crypto industry leaders reacting?
Reactions are split. Some, like Coinbase’s CEO, oppose the current bill for restricting stablecoin rewards. Others believe passing some form of the act is crucial for U.S. crypto innovation.

Q5: What happens if $6 trillion leaves banks for stablecoins?
Analysts warn it could significantly reduce lending, particularly hurting small businesses that rely on bank loans, and potentially increase interest rates for loans across the economy.