Catfish Effect? Stablecoins Are Not the Enemy of Bank Deposits

The debate over whether stablecoins will siphon deposits away from banks has been one of crypto’s most persistent storylines. Yet as data accumulates and regulatory frameworks harden, the picture looks far less dramatic and far more complementary—echoing the core argument in Christian Catalini’s Forbes essay, “How Banks Learned to Stop Worrying and Love Stablecoins.” Stablecoins have not triggered a systemic deposit drain. Instead, they are nudging banks to modernize payments and treasury services, while deepening links between blockchain rails and the traditional financial system. (See the original perspective in Forbes’ Digital Assets column by Christian Catalini.)

1) What the data actually shows about deposits

If stablecoins were an immediate substitute for retail deposits, we would expect to see persistent, broad-based deposit declines. In the United States, the opposite has held through 2025. FDIC’s Quarterly Banking Profile reports that domestic deposits increased for five consecutive quarters through Q3 2025, even as interest rates, money market funds, and new digital options competed for cash. That growth was driven in part by uninsured deposits, a category supposedly most “at risk” from stablecoin substitution. These trends are visible in the FDIC’s Q1 and Q3 2025 updates. (FDIC Q1 2025 and Q3 2025 highlights confirm rising domestic deposits and resilient liquidity.)
References: FDIC Q1 2025, FDIC Q3 2025 statement.

Bank funding is also shaped by “deposit stickiness” and pricing dynamics. Research from the New York Fed’s Liberty Street Economics shows banks reprice selectively across deposit types and lean on product mix to stabilize funding—another reason the feared one-way exit into stablecoins has not materialized. (Deposit betas analysis)

2) Where stablecoin reserves actually sit

A critical reason stablecoins have not “drained” bank deposits is that leading issuers hold the vast majority of reserves in short‑dated U.S. Treasuries and reverse repos—not in bank deposits. Circle’s weekly disclosures and monthly attestations show USDC reserves are composed primarily of Treasuries and overnight reverse repo via the SEC‑registered Circle Reserve Fund, with only a minority in cash deposits at systemically important institutions. (Circle transparency page)

On the market structure side, the Bank for International Settlements (BIS) finds that as of 2025 stablecoin assets under management exceed $200 billion, with significant purchases of U.S. Treasury bills in 2024–2025—evidence that the marginal dollar backing stablecoins often migrates to public debt markets rather than bank balance sheets. (BIS Working Paper: Stablecoins and safe asset prices) A separate BIS bulletin frames the core policy challenges—financial stability, monetary sovereignty, and “same risk, same regulation” limits—as adoption grows. (BIS Bulletin on stablecoin growth)

Bottom line: reserve composition matters. To the extent stablecoin reserves are held in T‑bills and reverse repo, they do not behave like retail deposits—and they can even increase structural demand for safe assets.

3) The complementarity thesis, in practice

Rather than replacing banks, stablecoins increasingly ride alongside or plug into banking infrastructure:

• Visa expanded its stablecoin settlement capability in the U.S., enabling issuer and acquirer partners to settle Visa obligations in USDC with seven‑day availability—directly modernizing card network treasury flows without touching consumer card UX. (Visa press release, Dec 16, 2025)
• Stripe re‑enabled crypto payments in 2024, starting with USDC on major chains, as a response to developer and merchant demand for faster, programmable settlement. (TechCrunch coverage)
• JPMorgan’s deposit token, JPM Coin, now live for institutional clients on public blockchain infrastructure, shows how tokenized bank deposits can coexist with asset‑backed stablecoins in a multi‑rail future. (J.P. Morgan: JPM Coin deposit token, and product page: What is JPM Coin?)
• Core market infrastructure is moving on‑chain. DTCC obtained an SEC no‑action letter to tokenize DTC‑custodied assets and announced plans to mint a subset of U.S. Treasuries on Canton Network—concrete steps toward 24/7 collateral mobility and atomic settlement that align with a tokenized, programmable financial stack. (DTCC press release, DTCC x Digital Asset / Canton)

These moves strengthen the case that stablecoins and tokenized deposits are complement technologies: stablecoins excel at open, cross‑platform settlement; tokenized deposits preserve the legal and regulatory properties of traditional bank money for institutional workflows. Both can be embedded in banking and payments.

4) Regulation is catching up—reducing run risk and clarifying roles

In the EU, the Markets in Crypto‑assets Regulation (MiCA) Titles III and IV for asset‑referenced tokens (ARTs) and e‑money tokens (EMTs) have applied since June 30, 2024, with ESMA and the European Commission clarifying timelines for non‑compliant tokens and compliance expectations for crypto‑asset service providers. (ESMA/EC statement, Jan 17, 2025) The EBA has published final and draft technical standards on authorization, reporting, and supervisory colleges for significant tokens—an essential layer for consistent oversight. (EBA RTS/ITS updates, EBA MiCA supervisory role)

In the U.S., the New York Department of Financial Services (NYDFS) guidance remains a reference point: full reserve backing, segregation, and timely redemption are table stakes for DFS‑supervised issuers. (NYDFS stablecoin guidance) The BIS’s Annual Economic Report 2025 further articulates a blueprint for a tokenized monetary system where tokenized central bank reserves, tokenized commercial bank money, and government bonds interoperate—explicitly noting that today’s stablecoins fall short as the “mainstay” of money without robust guardrails. (BIS Annual Economic Report 2025, Chapter III, BIS press release)

Regulatory certainty does not “bless” every design. It separates safe, redeemable stablecoins from riskier constructs, clarifies issuer obligations, and, crucially, gives banks the confidence to integrate on‑chain settlement where it improves speed and control.

5) The catfish effect: competition that modernizes bank rails

Stablecoins are also catalyzing faster payments adoption. U.S. instant payments grew dramatically in 2024–2025:

• The Clearing House’s RTP network raised its single‑payment limit to $10 million, with record throughput, rising daily averages, and >1,000 financial institutions live—supporting high‑value, real‑time B2B and treasury flows. (RTP $10M limit, Q2 2025 surge, record day)
• The FedNow Service crossed the 1,500‑participant milestone in late 2025 and raised its network transaction limit to $10 million, signaling growing commercial demand for always‑on settlement. (FedNow participants, participants list page)

As instant bank rails become ubiquitous, banks can match stablecoins’ “always on” promise for many domestic use cases. Meanwhile, stablecoins still shine as a neutral, internet‑native settlement asset across wallets, chains, and borders—especially in cross‑border corridors and programmable commerce.

6) What users and builders should do now

• Treat stablecoins and bank deposits as complementary tools. Use instant bank rails (RTP, FedNow) where available; use reputable, fully reserved payment stablecoins for on‑chain settlement, cross‑platform treasury, and cross‑border flows.
• Prefer transparent issuers. Review live disclosures on reserve composition, redemption, and audits/attestations. (USDC transparency) BIS research highlights how reserve quality affects peg stability and systemic linkages. (BIS: Public information and stablecoin runs)
• Watch real institutional adoption. Visa’s USDC settlement, JPM Coin deposit tokens, and DTCC tokenization plans are bellwethers for how programmable money will coexist with, and upgrade, traditional finance. (Visa USDC settlement, J.P. Morgan, DTCC authorization)

7) A note on global flows and emerging markets

Stablecoins are not just a trader’s tool. IMF research shows significant cross‑border stablecoin flows, with relative importance highest in regions where traditional rails are slow or expensive—supporting the view that stablecoins meet real transactional needs beyond speculation. (IMF working paper on international stablecoin flows) Policymakers should weigh both financial stability safeguards and the inclusion benefits of cheaper, programmable money movement.

Putting it together

• Deposits remain sticky and have grown in recent quarters, contradicting the “immediate disintermediation” narrative. (FDIC Q3 2025)
• Stablecoin reserves are largely held in T‑bills and reverse repo, not bank deposits, shifting the macro conversation toward safe‑asset demand and market plumbing. (BIS Working Paper, USDC reserves)
• Banks and market infrastructures are integrating tokenized money and assets, with clear, incremental steps toward 24/7 settlement and programmable finance. (Visa, J.P. Morgan, DTCC)
• Regulatory frameworks (MiCA in the EU; NYDFS guidance in the U.S.) now define how safe, redeemable stablecoins should operate, reducing run risk and enabling bank‑grade integrations. (ESMA / European Commission, EBA RTS/ITS, NYDFS, BIS Annual Economic Report 2025)

Stablecoins are not the enemy of bank deposits. They are the catalyst—the “catfish”—pushing banks to upgrade their rails and deliver programmable finance, while offering crypto‑native users a settlement asset that moves at internet speed.

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Security tip for on‑chain stablecoin users

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