Community banks may not need to issue their own stablecoins to benefit from the growth of digital payments, but they risk losing valuable customer relationships if businesses adopt new payment services outside their institutions.
The pressure on smaller lenders predates stablecoins. Customers have increasingly been drawn to larger banks and fintech platforms offering faster payments, more advanced apps and broader treasury services.
An April 2025 Better Markets report found that banks with less than $10 billion in individual assets collectively held about $2.5 trillion, a figure that had changed little over three decades while the largest banks expanded significantly.
Stablecoins have nevertheless prompted concern among bank leaders because deposits support lending and liquidity. When a customer exchanges a bank balance for a digital dollar, the lender could lose both funding and the associated margin.
However, the evidence so far does not show a clear flow of deposits away from community banks. The American Bankers Association, citing an April 2025 estimate from the Treasury Borrowing Advisory Committee, has warned that up to $6.6 trillion in transactional deposits could theoretically move into stablecoins.
That figure represents potential exposure rather than recorded withdrawals. Community bank deposits grew by roughly 26%, or about $482 billion, between June 2019 and March 2026, during the period in which stablecoins expanded.
Independent studies by CRA International and the Council of Economic Advisers have also found no statistically significant relationship between the growth of stablecoins and deposit outflows from community banks. The pattern is similar to the experience of money-market funds and brokered certificates of deposit, which have offered higher returns than current accounts without eliminating them.
The wider risk for community banks
The more immediate threat may be the loss of the wider financial relationship rather than the deposit itself. A business could retain its balance with a community bank while using another provider for payments, foreign exchange, merchant services and treasury management.
Over time, the outside platform would gain access to transaction data, fee income and regular contact with the customer. The bank might remain the place where money is held, but no longer be where important financial decisions are made.
That process can begin when a company is small. Mercury says it serves more than 300,000 businesses and individuals, while a ten-person start-up using a fintech platform today could become a significant corporate client in the future. By then, moving its payment and treasury systems could be costly and disruptive.
Stablecoins and tokenised deposits offer smaller banks possible ways to compete for those relationships, although they serve different purposes. Stablecoins provide connectivity across open blockchain networks and may be particularly useful for cross-border payments.
Tokenised deposits keep the familiar bank liability while offering faster settlement and software-based controls within participating networks. Neither model necessarily has to displace the other.
The passage of the GENIUS Act has established a federal framework for payment stablecoins, giving banks a clearer basis for deciding whether to partner with providers, which services to offer and how to manage the risks.
For most community banks, the practical response is unlikely to involve building a blockchain from scratch. They can instead buy or partner for infrastructure, connect customers to stablecoin and tokenised-deposit networks where appropriate, and retain control over compliance, liquidity, lending, data and payment routing.
Traditional payment systems will remain important. The Nacha network processed 33.6 billion payments worth $86.2 trillion in 2024, underlining that digital assets are more likely to add another option than replace every existing rail.
Community banks already possess an asset that technology companies must spend heavily to develop: customer trust. The lenders best placed to compete will be those that use new payment technology to offer greater choice while keeping customers within the institution they already rely on.
