Stablecoin proliferation threatens the profit structure of domestic banks.

As the likelihood of stablecoin proliferation increases, some analyses suggest that the income structure based on deposits in the domestic banking industry may be shaken. If deposits shift to digital payment methods outside of banks, loan sources and fee income could decrease accordingly, indicating that the overall profit model of the current banking industry faces transformative pressure.

Senior Research Fellow Lee Da-ki of the Korea Institute of Finance pointed out this issue in the report titled “Impact and Implications of Active Stablecoins on the Banking Industry” released on the 10th. Stablecoins are digital assets based on relatively safe assets such as fiat currency or government bonds, designed to maintain stable value. Unlike volatile virtual assets, they are more likely to be used in remittances and settlements, which could directly compete with the bank’s inherent functions—payment and settlement.

The report specifically notes that the domestic banking industry may be more vulnerable to such changes. Commercial banks’ won deposit-to-loan ratio is around 100-110%, higher than the global average of about 80%. The deposit-to-loan ratio indicates the proportion of deposits to loans; a higher ratio means it is difficult to meet loan demands relying solely on deposits. Therefore, domestic banks depend heavily on wholesale funding such as bank bonds. If stablecoins spread and cause deposit outflows, their lending capacity could shrink or funding costs could rise. Internet banks are no exception. If the low-cost funding structure centered on demand deposits (withdrawable at any time) is weakened, profitability could be directly pressured.

However, the report does not believe that banks will be passively overwhelmed. It assesses that banks’ long-standing trust, customer management capabilities, and regulatory experience are advantages that new issuers will find difficult to catch up with in the short term. Based on this, the report recommends that large commercial banks should participate in the new ecosystem by independently issuing won stablecoins or providing settlement infrastructure. It also points out that internet banks should explore stablecoin-related services while working toward diversifying their funding structures to reduce dependence on deposits.

The report also emphasizes that institutional design and policy roles are equally important. It suggests considering a plan to deposit a certain proportion of stablecoin issuance reserves into banks, but cautions that given the high deposit-to-loan ratio in the domestic banking sector, this should be approached carefully. Additionally, utilizing stablecoins as a supplementary means to central bank digital currencies (CBDC)—the digital form of fiat issued by central banks—could enhance the efficiency of the digital currency ecosystem. This trend indicates that future banking competitiveness will depend on how quickly they can respond to restructuring in digital settlement and funding structures, rather than sticking to the traditional business model centered on the interest margin from deposits and loans.