Stablecoins and Bank Profitability in 2025

Stablecoins and bank profitability in 2025 are at the center of a heated debate over the future of global finance.

Stablecoins, which are blockchain-based assets pegged to fiat currencies, have grown from niche crypto tools to powerful instruments for payments, remittances, and liquidity management.

What Are Stablecoins, and Why Do They Matter in 2025?

In 2025, stablecoins have become an essential component of the global financial ecosystem, bridging the gap between traditional finance and blockchain-based innovation. 

These digital assets, designed to maintain a stable value, are pegged to fiat currencies such as the US dollar or euro, combining the trustworthiness of government-backed money with the speed and transparency of blockchain technology.

Types of Stablecoins in 2025

Fiat-backed stablecoins are the most commonly used in 2025. Each token is 1:1 backed by fiat currency reserves held by banks or custodians. Examples include:

USDC (USD Coin):

• USDC (USD Coin): Issued by Circle, which is known for its transparency and compliance with US regulations.

PYUSD (PayPal USD)

• PYUSD (PayPal USD): A new entrant gaining traction thanks to PayPal’s global network.

EURC (Euro Coin):

EURC (Euro Coin): A Circle-issued stablecoin pegged to the euro, gaining popularity in European DeFi.

Crypto-Backed Stablecoins: These use overcollateralized crypto assets (such as ETH) to ensure price stability. A noteworthy example:

DAI: Governed by MakerDAO and continues to operate in a decentralized manner, increasingly integrating with real-world asset (RWA) strategies.

Algorithmic Stablecoins: These use smart contracts and supply adjustments instead of reserves. However, due to previous failures (e.g., TerraUST), their role has shrunk. Any models that survive in 2025 are strictly regulated or require partial collateral backing.

CBDC-Tied Tokens: In 2025, some jurisdictions are allowing CBDC-linked stablecoins issued by private institutions and backed by central bank digital currencies. These hybrid models are gaining traction in markets such as Singapore and Hong Kong.

Why Stablecoins Matter for Payments and Liquidity in 2025

Stablecoins have become central to crypto payments, providing instant, borderless, and low-cost transactions. Businesses and individuals use them for:

• Remittances: Stablecoins are used, especially in Latin America, Africa, and Southeast Asia, to avoid expensive and slow money transfer services.
• B2B Settlements: Enterprises use regulated stablecoins for near-instant invoice settlements, lowering FX risk.
• Liquidity Management: Stablecoins are used by traders, funds, and fintechs to transfer capital between platforms, exchanges, and DeFi protocols without converting to fiat.

With over $150 billion in circulating supply (as of mid-2025), stablecoins have emerged as the dominant on-chain medium of exchange, and their compliance with evolving regulations has increased institutional trust and adoption.

Traditional Bank Profitability Models Explained

Despite rising fintech and crypto innovation, traditional banks in 2025 continue to rely on time-tested revenue models based on financial intermediation and regulatory support. However, digital assets and stablecoins are increasing pressure on these models in 2025.

1. Core Revenue Streams for Banks

Banks primarily generate income from the following sources:

• The Net Interest Margin (NIM): The difference between the interest banks earn on loans and the interest they pay on deposits. A high NIM indicates strong profitability.
• Service and Transaction Fees: Include account maintenance, overdraft, loan processing, and card usage fees.
• Foreign Exchange (FX) Spreads: Banks profit from currency conversion services, particularly in international payments, where crypto payments and stablecoins are gaining traction.
• Custodial and Asset Management Services: High-net-worth individuals and institutions pay for the safe storage of assets such as bonds, stocks, and, increasingly, digital assets.

2. Importance of Deposit and Lending Cycles

Deposits are the lifeblood of any bank’s balance sheet. They provide the capital that banks need to issue loans, invest in securities, and maintain liquidity. A healthy loan-to-deposit ratio (LDR) promotes efficient capital utilization while adhering to regulatory compliance.

When deposits flow into stablecoins or DeFi platforms, banks risk losing access to low-cost funding, reducing lending margins and profitability. The emergence of self-custody and stablecoin-based yield products is forcing banks to reconsider deposit incentives in 2025.

3. Central Bank Policies and Profitability in 2025

Central bank interest rate policies continue to be a key driver of bank profitability. From 2020 to 2023, ultra-low interest rates compressed margins. The 2023-2024 rate hikes improved NIMs but increased loan default risks.

Global monetary policies began to stabilize in 2025, but inflation remains uneven, prompting central banks such as the Federal Reserve and the European Central Bank to exercise caution. Banks must now navigate:

• Tighter capital requirements.
• Basel III Endgame Compliance
• Digital asset exposure guidelines (particularly for regulated stablecoins)

4. Key Profitability Metrics: 2020-2025 ROE Trends

An overview of Return on Equity (ROE) for major global banks:

Year	JPMorgan Chase	HSBC	UBS	Bank of America
2020	12.1%	3.1%	9.5%	8.7%
2022	15.0%	9.9%	11.2%	14.2%
2025 (Est.)	~14.6%	~10.3%	~12.5%	~13.8%

Although bank profitability has rebounded from pandemic lows, digital asset adoption and stablecoin disruption are introducing long-term risks to traditional revenue models.

How Stablecoins Threaten Traditional Bank Revenue Streams

As stablecoins gain broader regulatory support and institutional integration in 2025, their disruptive impact on banking revenues is becoming more pronounced. 

These digital assets enable faster, cheaper financial services while bypassing traditional banking infrastructure and eroding several key revenue streams.

1. Disintermediation of Cross-Border Payments

Traditionally, cross-border transactions are routed through a network of correspondent banks, resulting in high fees, FX spreads, and multi-day settlement periods. Stablecoins and financial disintermediation address these inefficiencies by providing real-time, low-cost alternatives.

• Stablecoin rails such as USDC and PYUSD now settle billions of dollars across borders daily, especially in remittances and global payroll.
• Fintechs and crypto payment providers that use stablecoins have reduced the average cost of cross-border transfers from 6.5% in 2020 to less than 1% in some markets by 2025.

This direct, peer-to-peer infrastructure threatens the profitability of banks’ traditional SWIFT-based payment systems.

2. Decline in FX Revenue from Blockchain-Based Stablecoin Use

Banks earn significant revenue through foreign exchange transactions. However, stablecoins pegged to major fiat currencies allow users to completely avoid currency conversion services.

• Multi-currency stablecoins such as USDC, EURC, and GBPX enable seamless wallet-to-wallet transfers, removing the need for traditional FX swaps.
• The World Bank estimates that by the Q2 of 2025, FX revenue for global banks has fallen by more than 10% in regions with high stablecoin adoption, particularly Southeast Asia, Latin America, and Africa.

This shift has a direct impact on stablecoin revenues in banking, particularly for banks that rely heavily on FX and cross-border business.

3.  Outflow of Deposits to Stablecoin Platforms and DeFi Protocols

Stablecoins are now competing directly with bank savings accounts. Platforms such as Aave, Compound, and institutional-grade custodians provide yield-bearing stablecoin products, often offering higher returns and real-time access.

• In 2025, an estimated $120 billion in deposits migrated from traditional banks to stablecoin wallets and DeFi platforms.
• According to Chainalysis, nearly 70% of stablecoin holders outside the US consider them a “functional cash alternative.”

This outflow reduces banks’ cheap funding base, forcing them to offer higher interest rates or risk slowing lending growth.

4. Reduced Demand for Traditional Custodial Services

Custody was once considered a premium banking service, particularly for high-value clients and institutions. Clients are increasingly storing assets outside of banks as self-custody wallets, MPC solutions, and regulated digital asset custodians gain popularity.

• Regulated stablecoins, like USDC and PYUSD, are securely stored using on-chain wallets, hardware devices, and fintech-led custody solutions.
• As a result, traditional banks are losing custody fees, which typically ranged between $15 and $25 per $1 million held in corporate accounts annually.

This shift in custody preferences is consistent with the broader stablecoin impact on banking revenue, particularly in wealth management and institutional finance.

Stablecoins and financial disintermediation are reshaping the core functions that banks have traditionally dominated, including payments, foreign exchange, deposits, and custody, forcing the industry to rethink its value proposition in a tokenized economy.

Adaptive Strategies: How Banks Respond to the Rise of Stablecoins

Traditional banks are no longer sitting on the sidelines as stablecoins gain traction in 2025. 

Leading institutions are actively reshaping their digital strategies to remain relevant in the evolving financial landscape, from launching bank-backed stablecoins to investing in tokenized banking assets.

1. Stablecoin Adoption and Strategic Partnerships

Some of the world’s largest banks have already integrated stablecoin technology or collaborated with blockchain networks:

• JPMorgan Chase’s JPM Coin is expanding its role in intra-bank settlements and corporate treasury services, processing billions of tokenized USD transfers through its Onyx platform.
• HSBC, in partnership with Wells Fargo, has implemented blockchain-based FX settlement tools to reduce reliance on traditional cross-border payment methods.
• Standard Chartered and BNY Mellon are exploring tokenized asset platforms that incorporate stablecoin settlement layers for faster trade finance execution.

These actions show a clear intention to compete with or integrate regulated stablecoins into legacy operations.

2. Investment in Blockchain Infrastructure and Private Stablecoin Pilots

Banks are increasingly building their own blockchain capabilities and piloting internal stablecoins:

• UBS and Deutsche Bank are making investments in tokenization platforms for asset settlement and real-time liquidity management.
• Societe Generale has launched EURCV, a euro-denominated stablecoin on Ethereum designed for institutional clients in the DeFi ecosystem.
• Japan’s MUFG is piloting the Progmat Coin, a blockchain-based stablecoin framework that complies with Japanese digital asset regulations.

These initiatives aim to retain control while providing the same benefits as public stablecoins, namely transparency, programmability, and real-time settlement.

3. Tokenized Deposits vs Stablecoins: A Parallel Evolution

A growing number of banks are exploring tokenized deposits as a competitive response to stablecoins.

• Tokenized deposits, unlike stablecoins, which are issued by private or decentralized entities, are claims on commercial bank reserves that are fully regulated.
• The Monetary Authority of Singapore (MAS) has supported tokenized deposit trials under Project Guardian, showing potential for interbank clearing and retail payments.

In 2025, banks see tokenized deposits as a safer, more compliant alternative to stablecoins, particularly for use in regulated finance networks.

4. Partnering with Fintechs or Launching Bank-Backed Stablecoins

Instead of competing, some banks are partnering with fintech companies to co-create compliant stablecoin ecosystems:

• BNP Paribas and Chainlink explored oracles for real-world asset pricing in tokenized bond settlements.
• Zodia Markets (backed by Standard Chartered) provides custody and trading services for institutions aiming to leverage stablecoins for digital asset exposure.
• Several mid-tier banks in Europe and Asia are launching bank-backed stablecoins linked to local currencies to serve the retail and SME markets.

This collaborative approach aligns with the emerging trend of tokenized banking assets, resulting in hybrid models of digital finance that blend compliance and innovation.

While stablecoins pose clear threats, forward-thinking banks are using them to build a tokenized financial system where bank-backed stablecoins and regulated tokenized assets can coexist securely with DeFi and traditional finance.

Regulatory Dynamics Sha Shaping Stablecoins and Bank Integration in 2025

The evolution of stablecoin regulation in 2025 is playing a significant role in how banks interact with and adopt digital assets. 

Regulatory clarity has progressed from theoretical frameworks to enforceable standards that impact everything from capital requirements to cross-border compliance.

1. Global and Local Regulatory Clarity

Regulatory progress in major jurisdictions drives institutional adoption and cautious bank participation:

• Stablecoins are classified as e-money tokens (EMTs) or asset-referenced tokens (ARTs) under MiCA (Markets in Crypto-Assets Regulation), which was fully implemented in the EU mid-2024. EMTs like EURC are subject to strict governance, reserve management, and redemption mandates.
• In the US, the Financial Stability Oversight Council (FSOC) has designated certain stablecoin issuers as systemically important, prompting increased federal oversight.
• The SEC vs CFTC jurisdictional debate continues in 2025, particularly over whether stablecoins are subject to securities or commodity regulations. However, there is bipartisan support for a new legislative framework designed specifically for payment stablecoins.
• Asia-Pacific regions such as Singapore, Japan, and Hong Kong have pioneered stablecoin issuer licensing regimes, allowing regulated stablecoins to gain traction in institutional finance.

2. Capital Treatment of Stablecoin Holdings and Issuers

One important factor influencing bank-stablecoin integration is how stablecoin holdings are treated under bank capital rules:

• Basel Committee guidance now mandates banks with exposure to stablecoins on their balance sheets to maintain capital buffers proportionate to the issuer’s creditworthiness and asset backing.
• Tokenized deposits are given preferential treatment under Basel III rules because they are liabilities backed by the issuing bank, whereas third-party stablecoins are risk-weighted based on reserve transparency and redemption risk.

This regulatory distinction heavily influences whether banks issue their own stablecoins or collaborate with regulated third-party tokens.

3. AML/KYC Integration and Stablecoin Compliance Tools

Regulators have expressed concern about the potential use of stablecoins for illicit activity. In 2025, compliant infrastructure is critical for both banks and stablecoin issuers:

• Banks’ stablecoin compliance now includes integration with on-chain analytics tools (such as Chainalysis and TRM Labs) to monitor wallets and suspicious transactions in real time.
• Travel Rule requirements are enforced using interoperability protocols such as Travel Rule Universal Solution Technology (TRUST), particularly for transactions that exceed regulatory thresholds.
• Stablecoin issuers such as Circle and Paxos have implemented bank-grade KYC procedures, including real-time sanction screening and UBO (ultimate beneficial owner) disclosure.

These tools enable banks to engage with regulated stablecoins in a compliant and auditable manner.

4. Regulation’s Role in Bank-Stablecoin Synergy or Competition

Regulation now serves as both a gatekeeper and an enabler for bank-stablecoin collaboration:

• Bank-stablecoin synergy is emerging in tightly regulated environments via sandbox programs and public-private innovation hubs (for example, Singapore’s Project Guardian and the United Kingdom’s Digital Securities Sandbox).
• Banks in jurisdictions with fragmented or overly restrictive regulation are more likely to see stablecoins as competitive threats than collaborative tools.
• According to the Bank for International Settlements’ (BIS) 2025 survey, more than 68% of central banks now support frameworks that allow commercial banks to issue or integrate with stablecoins, as long as compliance benchmarks are met.

In essence, stablecoin regulation in 2025 is aimed at harmonization and accountability. 

As the landscape evolves, stablecoin compliance for banks will determine whether these digital assets become complementary instruments within the banking sector or remain outside the confines of traditional finance.

Emerging Business Models: Opportunities for Banks in a Stablecoin World

Stablecoins have disrupted traditional banking revenues, but they also create new opportunities. Forward-thinking banks are embracing stablecoin integration to unlock alternative revenue streams and improve digital service offerings in 2025. 

Banks are becoming critical players in the stablecoin economy as they reposition themselves in the evolving value chain.

1. Acting as Stablecoin Custodians or Liquidity Providers

As institutional demand for regulated stablecoins grows, banks are using their trusted position to offer custodial services for stablecoin reserves and private wallets.

• Large banks, like BNY Mellon, JPMorgan, and HSBC, now offer cold and multi-party computation (MPC)-based storage for stablecoins such as USDC, EURC, and PYUSD.
• Banks also serve as liquidity providers on tokenized trading platforms, providing over-the-counter (OTC) settlement services and capital access for stablecoin transactions.

This enables banks to earn custody fees, support institutional access to DeFi protocols, and manage counterparty risk using familiar regulatory safeguards.

2. Facilitating Real-Time Settlement Layers via Blockchain

Banks are increasingly utilizing blockchain technology to enable real-time settlements across borders and between institutions:

• JPMorgan’s Onyx platform uses JPM Coin to process billions of daily transfers, supporting intraday repo transactions and corporate liquidity operations.
• UBS, Santander, and other banks are collaborating with fintechs to create blockchain settlement layers that will bypass SWIFT bottlenecks.

Banks can gain competitive advantages in treasury and trade finance by leveraging stablecoins or tokenized banking assets to eliminate settlement delays, reduce reconciliation costs, and increase transparency.

3. Offering Crypto Banking APIs for Stablecoin Apps

Some banks are evolving into bank-as-a-service (BaaS) providers, offering crypto-friendly APIs that enable fintechs and Web3 platforms to connect to stablecoin infrastructure:

• These APIs enable real-time KYC/AML checks, fiat-to-stablecoin conversions, balance reporting, and programmable compliance.
• Banks such as Silvergate (prior to its collapse) paved the way, and now European digital banks and licensed crypto custodians are reviving these models with stricter regulations.

This strategy sets banks as key infrastructure players in the Web3 economy, serving both developers and institutional customers.

4. Charging for On/Off-Ramp Services and Stablecoin Conversion

As demand for crypto-fiat interoperability increases, banks are monetizing on/off-ramp services:

• Services include direct bank-to-wallet transfers, card-based stablecoin top-ups, and automated stablecoin-to-fiat conversion for merchant payments.
• In 2025, banks in Singapore, Switzerland, and Brazil are leading the way with fee-based models based on transaction volume and FX spreads on stablecoin redemptions.
• According to PwC’s 2025 Digital Banking Report, stablecoin ramping services represent a new $3 billion revenue opportunity for Tier 1 banks globally.

5. Use Case Examples: Stablecoin Lending and Short-Term Liquidity Management

Banks are entering the stablecoin lending market, providing secured credit lines against stablecoin collateral or allowing institutional investors to borrow and lend in a compliant framework.

• Example: Standard Chartered’s Zodia Markets offers stablecoin lending solutions to digital asset funds managing short-term liquidity between exchanges.
• These services are frequently layered with real-time risk analytics and automated margin calls via smart contracts.

This allows banks to replace declining net interest margins with new, technology-driven yield products while remaining regulatory compliant.

Banks in the stablecoin world are not just adapting; they are innovating. By taking on roles as custodians, infrastructure providers, and fintech enablers, they are turning disruption into long-term advantage.

Future Outlook: Will Stablecoins Erode or Enhance Bank Profitability?

As the financial ecosystem evolves rapidly, the big question for institutions remains: Will stablecoins and bank profitability be at odds in 2025, or can they coexist in a mutually beneficial model? 

The answer lies in how banks approach innovation, whether through resistance, adaptation, or complete integration.

1. Forecast Scenarios: Disruption, Adaptation, or Collaboration

Disruption: Banks that do not modernize risk losing their relevance. As stablecoin adoption scales in remittances, treasury, and merchant payments, banks that rely on legacy systems may see core revenue streams such as FX fees and payment processing erode further.

Adaptation: Mid-tier banks and neobanks are shifting to API-first, crypto-inclusive models. They are incorporating stablecoins into B2B services, launching tokenized deposits, and investing in custody and compliance tools to provide value-added services.

Collaboration: Instead of competing, leading institutions are working with fintechs and stablecoin issuers to co-create infrastructure. Examples include JPMorgan’s Onyx, Societe Generale’s EURCV, and Standard Chartered’s Zodia Custody.

Each scenario has a direct impact on how stablecoins and bank profitability evolve in 2025, serving as either an existential threat or a source of renewed growth.

2. The Rise of Programmable Money and Smart Contracts

The introduction of programmable money is altering the way financial agreements are carried out:

Smart contracts on public and permissioned blockchains now handle loan issuance, settlement, and collateral management.

Tokenized assets combined with regulated stablecoins enable real-time escrow and conditional disbursements, which reduce operational costs and fraud.

Banks that integrate these capabilities into their systems can provide faster, rule-based services, increasing efficiency and opening up new revenue streams in trade finance, supply chain, and capital markets.

3. Role of AI, DeFi Integrations, and Real-Time Finance

AI-powered compliance tools enable banks to track wallet behavior, assess counterparty risk, and improve AML/KYC effectiveness in stablecoin transactions.

Some forward-leaning banks provide DeFi integrations via secure APIs, allowing clients to interact with lending protocols or yield products while still maintaining custodial control.

The shift to real-time finance, fueled by stablecoins, tokenized settlements, and AI-powered decision systems, is reshaping liquidity, risk, and payment flows.

Banks that embrace these innovations not only maintain their profitability but also position themselves as digital finance leaders.

4. Which Banks Are Positioned to Win?

JPMorgan: With its JPM Coin, Onyx blockchain, and global reach, JPMorgan remains the industry standard for enterprise-grade blockchain integration.

HSBC is running tokenized bond settlements and FX experiments on blockchain rails.

Societe Generale: A pioneer in issuing euro-denominated stablecoins and testing DeFi integrations under regulatory oversight.

Singaporean and Swiss Banks: Benefiting from progressive regulation by providing stablecoin custody, payment processing, and treasury solutions to global fintechs.

These banks are not only weathering disruption; they are redefining the financial stack by integrating stablecoins into regulated frameworks.

The discussion of stablecoins and bank profitability in 2025 is no longer theoretical. Banks that resist innovation face a slow decline in revenue, whereas those that adapt and collaborate gain access to next-generation financial services.

Stablecoins are not a binary threat or savior; they are a tool. Whether they erode or increase profitability is entirely dependent on how well banks align their digital strategies, infrastructure, and compliance frameworks with the tokenized economy of the future.

Conclusion 

As of 2025, the intersection of stablecoins and bank profitability presents both a disruption and an opportunity. Stablecoins are already reshaping the way money moves, providing faster settlements, lower costs, and programmable functionality that traditional banks are only starting to match.

However, rather than indicating the end of banking profitability, this shift provides a road map for reinvention. 

Banks that embrace innovation, whether through custodial services, tokenized asset infrastructure, or stablecoin partnerships, can transform traditional operations into digitally agile, high-margin businesses.

The key is regulation-ready innovation. As compliance frameworks mature and regulated stablecoins become more prevalent in global finance, banks must strike a balance between trust and technology in order to thrive in the era of real-time, tokenized money.

In short, stablecoins and bank profitability in 2025 are not incompatible. Banks that innovate quickly, think globally, and partner wisely will emerge as winners.