Why community banks are rethinking stablecoins
Community banks have long watched customers drift to larger institutions that offer slicker apps, faster payments and more comprehensive treasury services. An April 2025 Better Markets report showed that banks with under $10 billion in assets collectively hold about $2.5 trillion, a figure that has barely moved in thirty years while the biggest banks have expanded dramatically.
The arrival of stablecoins sparked fresh anxiety. Some leaders worry that if a depositor swaps a bank balance for a digital dollar, the bank could lose funding and margin. The American Bankers Association, citing a Treasury Borrowing Advisory Committee estimate, warned that up to $6.6 trillion in transactional deposits could be exposed to stablecoin migration.
What the data actually show
Despite the alarm, the numbers do not support a mass outflow. Community-bank deposits grew roughly 26 percent, about $482 billion, between June 2019 and March 2026, covering the entire period of stablecoin growth. Independent studies by CRA International and the Council of Economic Advisers found no statistically significant link between stablecoin expansion and deposit withdrawals at small banks. The pattern mirrors earlier shifts to money-market funds and brokered CDs, which offered higher yields without draining checking accounts.
Beyond deposits: the real risk
The greater danger is losing the broader relationship. A business may keep its cash in a community bank but use a fintech platform for payments, foreign exchange, merchant services and treasury management. Over time that platform captures transaction data, fee revenue and daily customer contact, leaving the bank with only the balance sheet.
Fintech firms such as Mercury already serve more than 300 000 businesses and individuals. A ten-person startup that builds its finance on a fintech today could become a major corporate client in a decade, and switching its payment and treasury workflows later would be costly and disruptive. In that scenario the community bank never truly loses the depositor because the depositor never arrives.
How stablecoins and tokenised deposits can help
Stablecoins provide instant, cross-border connectivity on open blockchain networks, while tokenised deposits retain the familiar bank liability but add faster settlement and programmable controls. Neither is a single solution; they can complement each other.
Congress has eased the path by passing the GENIUS Act, which creates a federal framework for payment stablecoins. This gives banks clearer guidance on partnerships, service offerings and risk management. Waiting for every technical and regulatory question to disappear would be a risky choice.
Practical steps for smaller banks
Rather than building a blockchain from scratch, community banks can purchase or partner for core infrastructure, connect customers to stablecoin and tokenised-deposit networks where appropriate, and retain control over compliance, liquidity, lending, data and payment routing. Existing payment rails remain vital; the Nacha ACH Network processed 33.6 billion payments worth $86.2 trillion in 2024.
Trust is the advantage small banks already enjoy. By extending that trust with technology that speeds payments, reaches customers earlier and keeps the full financial relationship intact, banks can offer more choice without forcing customers to leave the institution they trust.
What comes next
Community banks that adopt stablecoin and tokenised-deposit solutions are likely to retain and grow their client relationships, while those that cling solely to traditional deposits may see their relevance erode as customers gravitate toward integrated fintech ecosystems.