Bank of America CEO Brian Moynihan warned that if interest-bearing stablecoins spread, deposit outflows of up to $6 trillion could occur from the U.S. banking system. That is about 30 to 35 percent of total deposits at U.S. commercial banks.

On Jan. 15, Cointelegraph reported that Moynihan said at a fourth-quarter earnings briefing that if stablecoins replace bank deposits, banks’ lending capacity could shrink and borrowing costs could rise. He said the outlook is based on a U.S. Treasury study.

Moynihan said interest-bearing stablecoins operate with a structure similar to money market funds that hold cash, central bank reserves and short-term Treasury bills. He said banks’ deposit base could weaken because funds would not be used for bank lending and would remain outside the financial system.

Moynihan said this could reduce lending capacity for households and companies. He said banks would be forced to rely on wholesale funding, which is relatively costly. "Deposit outflows ultimately lead to reduced lending or higher financing costs," he said.

Moynihan warned that small and midsize businesses could be hit hardest. He said that because they have less access to capital markets than large companies and depend more on bank loans, declining deposits could directly lead to higher borrowing costs.

Reflecting such concerns, the U.S. Congress is discussing legislation to limit interest-bearing stablecoins. A draft crypto market structure bill released by Senate Banking Committee Chairman Tim Scott includes a provision banning the payment of interest or yield to users who simply hold stablecoins. Rewards for staking or providing liquidity would be allowed.

The crypto industry is pushing back. Coinbase CEO Brian Armstrong took a critical stance on the bill. He withdrew support, saying the Senate is trying to limit stablecoin rewards to protect banks, and he also raised concerns about limits on tokenised stocks and the possibility of stronger government monitoring of cryptocurrency remittances.

In contrast, a16z Crypto's Chris Dixon argued that while the bill is not perfect, legislation is needed for the United States to maintain leadership in crypto innovation.