Bank of America CEO says stablecoins could drain trillions in bank deposits

Core Viewpoint - Bank of America CEO Brian Moynihan expressed that while the bank can adapt to the rise of stablecoins, there are significant concerns regarding the potential movement of up to $6 trillion in deposits into stablecoins, which could negatively impact the broader banking system by reducing lending capacity and increasing borrowing costs [1][6][7] Group 1: Stablecoins and Banking System Impact - Moynihan highlighted that the shift of deposits into stablecoins could lead to a reduction in banks' lending capacity, as deposits are essential for funding loans [7] - The American Bankers Association (ABA) has echoed these concerns, urging lawmakers to address "dangerous loopholes" in stablecoin legislation that allow issuers to offer yield-like incentives, potentially diverting savings from traditional banks [5] - The GENIUS Act, aimed at establishing a federal framework for stablecoin issuers, has faced criticism from banks for not including stronger regulations to prevent stablecoins from acting as interest-bearing deposit substitutes [4] Group 2: Legislative Context and Industry Reactions - RBC Capital Markets analyst Gerard Cassidy raised questions about whether U.S. lawmakers would address a "looming loophole" that could allow stablecoin deposits to pay interest, which is currently restricted [3] - The Senate has been debating provisions to adjust this loophole in a crypto market structure bill, but progress has stalled following Coinbase's withdrawal of support [3] - There is a divide in the banking sector regarding the risks posed by stablecoins, with some institutions, like JPMorgan, downplaying the systemic risk associated with stablecoins drawing savings onto blockchains for higher yields [8]