KBRA Financial Intelligence

Stablecoin Banking Integration To Shake up Billions in Fee Income

Traditional depositories face competitive threats and transformative opportunities as stablecoins and deposit tokens gain regulatory clarity and a path toward regular integration within the banking system. KBRA Financial Intelligence (KFI) has previously noted that the entrance of traditional financial institutions into the burgeoning digital asset space is likely to supercharge the addressable market for stablecoins within the banking industry. Generally defined as a digital token with a stable value derived from a 1:1 peg to the underlying value of a currency or similar fungible asset, stablecoins now handle trillions of dollars in global transfer volume each year.

Total USD-pegged stablecoin supply surpassed $300 billion for the first time this month despite being dominated by just a few nonbank financial institutions. Roughly 60% of the supply remains concentrated in just one issuer’s token, Tether USD (USDT), while Circle’s USD Coin (USDC) represents about one-quarter of the total market share. The prospect of traditional banking institutions adding stablecoin rails and perhaps even issuing their own tokens may break up this high level of concentration.

What Types of Income Are at Risk for Banks?

As much as $6.6 trillion in demand deposits and other checkable deposits could face partial disintermediation pressure from stablecoin alternatives, according to figures from a 2025 U.S. Treasury report. Notably, banks will face competition not only from nonbanks to retain their funding, but also from their fellow depository institutions. While the loss of deposits or heightened competition for funding could potentially threaten to compress bank lending margins, it is difficult to forecast the extent to which such a discontinuity might emerge. However, the implications for certain types of noninterest income may be clearer.

Transaction fees could be particularly ripe for disruption in the coming years, as stablecoin and tokenization technologies can disintermediate settlement by enabling transactions to occur on a single blockchain ledger that is shared among all network participants. This runs counter to the current system, where each bank keeps its own version of account balances and must constantly exchange messages to reconcile them.

Utilizing a single network of cryptographically-verified transactions removes certain layers and barriers that are omnipresent within the banking system. Since the stablecoin tokens move in tandem with updates to the ledger, value itself is being transferred and settled instantly between parties, as opposed to exchange of payment instructions that are utilized to secure settlement later.

Interchange Fees

Per KFI data, interchange fees earned by banks generated more than $12.5 billion in noninterest income for U.S. banks in 2Q 2025, equivalent to almost 15% of total noninterest income earned by banks in the quarter. The interchange fee, which can sometime represent up to 3% of a total transaction amount, is largely derived from the four-party card model, which involves an exchange between a cardholder, the card’s issuer bank, a merchant, and the merchant’s bank every time a debit or credit card is used to complete a purchase.

This fee is meant to compensate the issuing bank for the costs, risks, and services it provides in enabling and guaranteeing card transactions. However, as stablecoins or deposit tokens are prefunded and can be sent directly from one address (or digital wallet) to another, only a relatively negligible network fee of a few cents or less is charged to send a transaction.

Wire Fees

Wire fees, which generally cost between $10 and $40 per transaction, may become another form of fee income subject to structural erosion. Although they represent only a small share of banks’ noninterest income—approximately $48.5 million in 2Q 2025—a gradual drying up of traditional wire activity, which has long served as the foundation for cross-border and foreign exchange payments, as well as sweeps and other liquidity operations, could cascade into lower revenues from treasury and cash management services, which depend on those same payment rails and carry their own associated fees.

Stablecoins remove the need for the complex and risk-bearing process of messaging and reconciliation associated with wire transfers. Due to the shared ledger of a stablecoin network, final settlement is automatic and nearly immediate, not deferred to end-of-day or batch windows.

Overdraft Fees

One final type of fee worth covering in this non-exhaustive list is the overdraft fee. Banks generally allow temporary negative balances as a form of implicit short-term credit for a fee, but users of an on-chain wallet cannot transact beyond what their balance allows, removing the credit exposure that underlies overdraft fees. Crypto wallets are also generally zero-fee, which could eventually impair income earned from a wide variety of account management fees that were already losing popularity among clients and depositories.

KFI has previously noted that several large U.S. banks have eliminated or significantly reduced overdraft fees over the past few years in anticipation of customer preference. For other banks, these types of fees may still represent a material chunk of their income; in some cases, a double-digit percentage of total revenue. If traditional checking and transaction accounts are to lose volume to self-custodied or tokenized alternatives, ancillary fee streams—small individually but significant in aggregate—are expected to fade.

Custodian Banks to Reap Revenues From Stablecoin Reserves

Although the adoption of stablecoins might cause banks to experience a degradation of certain revenue streams, at least a part of those losses could be counterbalanced by a gain in efficiency. By replacing fragmented payment systems with shared, programmable ledgers, banks have an opportunity to sharply reduce some amount of data processing, reconciliation, and compliance expenses. Further, instant settlement should be expected to reduce liquidity and funding costs.

Moreover, the chance for nonbank stablecoin issuers to interact more directly with the traditional banking system is enabling banks to bolster noninterest income via the custody of reserves backing certain stablecoins. In the case of asset-backed stablecoins, their peg to the dollar is maintained by a guarantee that one token can be constantly redeemed for one dollar and liquidity for these redemptions comes from a pool of reserves, with the most popular reserve asset being U.S. Treasury (UST) securities.

The Bank of New York Mellon (KFI Score: B-), a top U.S. custodian bank by income from custody and fiduciary accounts, has been developing its capabilities for digital asset custody since 2022. It has become the primary custodian for the reserves backing several stablecoins, including Circle’s USD Coin (USDC), Ripple Labs’ Ripple USD (RLUSD), and Societe Generale-Forge’s USD CoinVertible (USDCV).

KFI has also covered the custodial capabilities of the “crypto-native” Anchorage Digital Bank and its surging fiduciary income. In September, it was revealed that Anchorage would partner with Tether to manage the issuance, reserve management, and financial, compliance, and risk management of its new USA₮ stablecoin, designed to comply with the new framework for payment stablecoins laid out in the recently passed GENIUS Act, which takes effect either 18 months on from its July 2025 enactment or 120 days after federal regulators issue final implementing regulations—whichever comes first. In addition, Anchorage Digital has selected major custodian bank U.S. Bank National Association (KFI Score: B-) to serve as the custodian for reserves backing its own payment stablecoins, adding a well-respected third party to provide an “extra layer of assurance” in its verification of reserve holdings.