Understanding the Surge in Stablecoin Adoption

The band Maroon 5 might have dozens of hit songs now, but their debut album, “Songs About Jane”, was actually a sleeper hit that took years to build momentum. The album debuted in June 2002, followed by tours with popular artists at the time, like Michelle Branch and Matchbox Twenty. It wasn’t until the rerelease of the album in October 2003 that the band gained traction, eventually earning a Grammy for Best New Artist three years after “Songs About Jane” was released. As the band learned, sometimes it takes a while to reach your moment.Stablecoins have had a somewhat similar journey to popularity. Just this year, they evolved from a niche cryptocurrency to a mainstream topic at bank boardrooms and regulatory offices. The Fireblocks State of Stablecoins 2025 survey, which gathered insights from nearly 300 financial institutions, banks, and fintechs worldwide, found that almost half are already using stablecoins for payments, with another 41% piloting or planning adoption. Financial institutions are increasingly integrating these platforms to modernize payments, treasury, and cross-border remittances. At the same time, new regulatory frameworks — most notably the GENIUS Act — are establishing clear licensing standards and compliance guardrails for payment stablecoins, bringing greater transparency and stability to the market and enabling safer industry participation.Mainstream banks are now able to view stablecoins as strategic infrastructure. For instance, U.S. Bank has launched a “Digital Assets and Money Movement” division, exploring opportunities in stablecoins, tokenization, and payments modernization, including acting as custodian for reserves supporting regulated stablecoins. Moves like this show that financial institutions are positioning themselves inside the new payment ecosystem.What Community Bankers Need to KnowOne of the most common concerns for community bankers is the risk that stablecoin adoption may draw away critical low-cost retail deposits. Recent studies suggest no significant relationship between stablecoin adoption and major deposit outflows at community banks under realistic scenarios. While adoption is growing, the customers currently using these digital assets tend to differ from those served by most community financial institutions (CFIs), focusing more on digital transactions, global transfers, and online marketplaces. For now, this means deposit displacement risk remains limited for CFIs. Still, the larger challenge may not be deposit flight but whether deposits supporting stablecoins can be used for local lending. If funds backing stablecoins are held in reserves that cannot be leveraged for loans, community banking institutions could lose the ability to reinvest locally. This scenario could create “dead deposits” — funds technically retained but inactive for credit creation — and that remains a deeper systemic concern for local economies. It underscores the imperative for thoughtful participation, ensuring local credit channels remain active.Despite these challenges, stablecoins should not be viewed solely as a market threat. They also represent meaningful strategic advantages. Stablecoins can support real-time payments, international transfers, and product development that expand value proposition. For CFIs, these technologies can operate alongside existing payment systems — enhancing speed, efficiency, and reach, while preserving the proven reliability of traditional rails. Payment Infrastructure: Evolution, Not DismissalCross-border payments continue to be a major area of opportunity. FXC Intelligence estimates that the global cross-border payments market is valued at over $194T and is expected to reach $320T by 2032. While settlement speeds are improving, many payments still experience delays driven primarily by domestic posting and compliance reviews, rather than technology alone. As a result, legacy rails remain proven and trusted — serving as the backbone for most US-to-global transactions, even as innovation accelerates. CFIs are encouraged to view stablecoins and related innovations as complementary to existing methods. Some early adopters are tapping into stablecoins through partnerships, gaining speed and efficiency for their customers while maintaining the relationship-driven service and regulatory confidence that defines their approach. Major payment networks and fintechs (Visa, Stripe, Thunes) are expanding their pilots and integrations, showing that tokenized payments are increasingly built on top of, rather than in place of, traditional rails. Strategic Considerations: Prudent and Timely ExplorationIt’s important for CFIs to know the window for participation remains open. The market is still maturing, giving institutions time to assess alignment and choose strategies that fit their operational and regulatory frameworks. Thoughtful planning will be key to ensuring innovation complements — not disrupts — core banking strengths.As PCBB’s Chief Operating Officer and ICBA Digital Assets Committee member Sheila Noll observed, “Digital assets and tokenized payments are reshaping how banks think about money movement. It’s important that community institutions have a seat at the table to ensure the solutions developed are safe, efficient, and inclusive.”That perspective captures the essence of this transition: participation matters. CFIs that engage in pilots, policy discussions, and industry consortia can help steer how tokenized settlements, liquidity models, and compliance frameworks evolve — ensuring the community banking model remains central to the future of financial infrastructure, not displaced by it.Stablecoins are evolving into serious regulated infrastructure. For CFIs, the timing is right to explore, vet, and align with stablecoin strategies while continuing to reinforce their core strengths in direct community investment and customer service. There is ample room to proceed thoughtfully — without abandoning legacy strengths or exposing institutions to unnecessary risks.