Impact of Stablecoin on Community Bank Transactions

This technical report analyzes transaction data from over 225,000 transactions across 92 community banks to investigate the impact of stablecoins on bank deposits and lending. The analysis reveals that a significant majority of community banks have customers actively transacting with Coinbase, with nine out of ten banks showing such activity. The report details that for every dollar returning from Coinbase, approximately $2.77 is leaving, indicating a concerning trend for community banks. The study highlights that as the stablecoin market grows, the potential for deposit flight increases, jeopardizing the funding available for small business loans and agricultural lending. It discusses the implications of the Digital Asset Market Clarity Act (CLARITY Act) in the context of yield-bearing stablecoins and the regulatory challenges faced by community banks. The findings suggest that community banks are at risk of losing deposits to crypto platforms, which could have long-term effects on their ability to provide credit to local economies.