By Ray Birch
ALPHARETTA, Ga.–When consumers are presented with a compelling alternative to traditional deposits, history shows they don’t hesitate to move their money. And what once took days or weeks can now happen in minutes.
For Robert Colvin, president and chief strategist at CU Capital Market Solutions (CMS), that speed of change is what makes the rise of stablecoins a pressing concern for credit unions as they enter their strategic planning season.
“Consumers can move funds instantly, and stablecoins represent a new kind of deposit instrument that could pull significant balances away from traditional institutions,” Colvin said. “This isn’t about panic—the sky isn’t falling—but it is about being aware and preparing now.”
The New “Deposit” Alternative
Stablecoins are digital tokens designed to maintain a stable value, typically backed by short-term Treasury securities, cash, or repurchase agreements. Earlier this year, Congress passed the GENIUS Act, creating a regulatory framework around stablecoins, while states like Wyoming have already rolled out their own stablecoin programs. That combination of federal authorization and state-level experimentation is accelerating mainstream adoption.
Colvin draws a clear comparison to the 1980s, when money market accounts emerged as a new savings vehicle. Then, depositors flocked to higher yields, destabilizing savings and loans institutions already weighed down by long-term, low-rate mortgages. The outcome resulted in the failure of approximately one-third of the S&Ls in the country, causing the Federal Savings and Loan Insurance Corporation (FSLIC) to also fail. The S&Ls that weathered the storm were placed under the FDIC.
“We’re in a very similar environment today,” Colvin said. “Stablecoins, like money market accounts back then, are liquid, easily transferable, and designed around safety. Once consumers gain comfort, the movement of funds could be swift and dramatic.”
Why Credit Unions Are Vulnerable
Banks and credit unions both face risks, but Colvin argues credit unions may feel the effects more acutely.
“If deposits leave banks, they can attract new funds by competing on rate,” he explained. “Credit unions, however, rely on their member base. When members move deposits out, the institution has to replace those members, not just the money.”
This distinction makes stablecoin adoption more than a rate competition issue—it’s a member retention challenge, Colvin asserted. The Kansas City Federal Reserve’s own Economic Bulletin recently warned that as deposits migrate into stablecoin accounts, financial institutions will see a shrinking asset base, limiting their ability to lend.
Today, just over 70% of credit union deposits ($1.3 trillion) sit in checking, savings, and money market accounts—funds that could be transferred with little friction, Colvin reminded.
Robert Colvin
“These are transactional dollars,” Colvin noted. “They can leave in a day if members perceive an attractive alternative.”
Lessons From SVB And Digital Liquidity
The collapse of Silicon Valley Bank (SVB) in 2023 demonstrated just how quickly deposits can vanish in a world of mobile banking. Over a single weekend, billions of dollars fled the bank. While the causes of SVB’s failure differ from the stablecoin threat, Colvin sees a common theme: technology has removed the friction that once slowed deposit migration.
“Depositors used to have to walk into a branch, fill out paperwork, and wait to open an account,” he said. “Now it’s as easy as tapping a button. Combine that convenience with a new product like stablecoins, and you have the ingredients for significant disruption.”
Projected Outflows
Forecasts vary, but most project massive growth for stablecoins. JPMorgan estimates the market could reach $500 billion by 2028. Standard Chartered places the figure at $2 trillion, and Bernstein predicts $4 trillion by 2035.
For credit unions, Colvin said, the real question isn’t whether stablecoins will grow—it’s how quickly. If consumer adoption follows the same trajectory as money market funds, the pace could be faster than many expect.
“Once people feel comfortable that these instruments are safe and regulated, the shift could happen almost overnight,” Colvin warned.
Colvin emphasized that the current planning cycle is the right time for credit union leaders to grapple with the stablecoin question.
“Boards and executives are allocating resources and setting priorities for the coming year,” he said. “They need to be asking: how do we prepare for possible deposit flight? How do we ensure funding stability?”
That doesn’t mean assuming the worst-case scenario. Rather, Colvin stressed balance.
“This isn’t the end of the world. But ignoring the possibility would be a mistake,” he said.
Building Stable Funding Alternatives
One strategy is to build up more stable, longer-term deposits that are less vulnerable to sudden flight. CMS developed its Capital Market CD (CMCD) program with that goal in mind. The program allows credit unions to attract institutional investors who purchase notes backed by insured share certificates, generating predictable funding for three to seven years.
“It’s not about selling a product—it’s about creating tools for stability,” Colvin said. “If stablecoins do start to siphon off transactional deposits, credit unions will need offsetting sources of funding to support lending and member services.”
Stablecoins are no longer a fringe experiment. With congressional legislation, Federal Reserve analysis, and state-backed initiatives, they’re entering the financial mainstream, reiterated Colvin, who added that since consumer behavior has changed—fast, digital, and frictionless—the shift could be swift.
“The S&L crisis showed what happens when institutions fail to anticipate how quickly depositors will respond to alternatives. This is about awareness and readiness,” Colvin concluded. “Credit unions don’t need to panic. They need to plan. Because when consumers are offered a new place to put their money—and it feels safe—they will move quickly.”