The Federal Reserve Board published a research note arguing that banks usually meet disintermediation threats from financial innovation by adapting rather than retreating. Drawing on the histories of money market funds and online payment platforms, the note says stablecoins combine balance-holding and payment functionality on digital rails, making them potential competitors for transaction balances and payment flows, but their effect on aggregate bank deposits depends on reserve structures and regulatory design and may amount more to a shift in funding composition and pricing than a one-for-one loss of deposits. In the money market fund episode, assets rose to about USD220 billion by end-1982, roughly 15 percent of bank deposits, before banks regained share through deregulation, sweep products and Money Market Deposit Accounts that attracted more than USD300 billion within three months of their authorization. In online payments, PayPal and Venmo grew to more than USD1.5 trillion of annual payment volume across over 400 million accounts and about USD40 billion of user balances, while banks eventually responded by upgrading real-time payment capabilities and scaling Zelle, which processed more than USD1.5 trillion and over 3 billion transactions in 2024. For stablecoins, the note highlights both defensive and adaptive responses, including lobbying for limits on interest-like features, development of bank-backed stablecoins and tokenized deposits, and provision of reserve, custody and wallet services. It cites the September 2025 Senior Financial Officer Survey, in which roughly half of respondent banks planned growth in at least one stablecoin or digital asset area over the next three years, about half of large-bank respondents prioritized tokenized deposit issuance, about 40 percent prioritized holding reserve assets for issuers, and around a third prioritized retail custodial or wallet services. The note also points to run-risk concerns, including faster 24/7 redemption dynamics, and notes that the GENIUS Act created a federal framework for payment stablecoins.
Federal Reserve Board 2026-05-01
Federal Reserve Board research finds banks respond to stablecoin competition with product innovation, regulatory adaptation and new digital asset services
The Federal Reserve Board published a research note arguing that banks typically respond to disintermediation threats from financial innovation by adapting products and funding structures rather than ceding market share, with stablecoins likely to alter the composition and pricing of bank funding rather than cause a one-for-one loss of deposits. Drawing on money market funds, online payment platforms and stablecoin activity, it highlights banks’ defensive responses, including bank-backed stablecoins, tokenized deposits, and reserve, custody and wallet services, and reports that roughly half of banks in the September 2025 Senior Financial Officer Survey plan growth in at least one stablecoin or digital asset area. It also flags run-risk concerns from 24/7 redemptions and notes that the GENIUS Act created a federal framework for payment stablecoins.