In mid-January 2026, during Bank of America’s external communication regarding its Q4 2025 financial report, the CEO of Bank of America, Brian Moynihan, issued a powerful warning. According to source C, he specifically pointed out that if crypto dollars begin to pay interest to holders within a legal and compliant framework, it could potentially disrupt about $6 trillion of the banking deposit base. Given the current total deposit size of approximately $17-20 trillion in U.S. commercial banks, this means that 30%-35% of the liabilities in the traditional banking system may face the risk of being repriced or even migrated. This is not just a numbers game, but a rapidly forming interest war in a regulatory gray area: on one side are commercial banks constrained by deposit insurance and capital regulations, with slow interest rate adjustments; on the other side are crypto dollars parked in treasury bonds and money market instruments, which have not yet been fully integrated into a unified regulatory framework. If this competition over “who pays interest on the dollar” fully ignites, the redistribution of deposits among banks, money market funds, and on-chain assets could rewrite the underlying structure of the global financial landscape.
From Earnings Call to Alarm: The $6 Trillion Warning
This risk alert appeared in a highly symbolic context: according to source C, the timing is pinpointed to the Q4 2025 earnings report period. In the external communication related to the earnings report, Brian Moynihan did not limit the discussion to profit margins, expense ratios, and credit costs, but raised his gaze to the changes in the entire dollar liability structure, suggesting that if crypto dollars can pay interest within a clear legal framework, the core deposit base of banks will face unprecedented structural challenges. The so-called $6 trillion figure is not unfounded; it is an estimated range based on sources A/C, calculated on the current total deposits of $17-20 trillion in U.S. commercial banks. In percentage terms, this translates to approximately 30%-35% of commercial bank deposits potentially being repriced or redistributed. This calculation is not a static breakdown of a single bank's balance sheet, but a risk alert regarding the potential upper limits of structural migration that may occur when interest rates and regulatory constraints change. It is important to emphasize that the $6 trillion is currently just a potential migration scale warning, indicating the possible impact level in extreme scenarios, rather than any timeline or predetermined path. Whether Moynihan himself has precisely written this figure in official documents, or the actual pace and peak of future migrations, remains to be disclosed and verified in documents, and should not be misinterpreted as a locked-in certainty.
When Crypto Dollars Start Paying Interest: Regulatory Gray Area and Interest Rate Arbitrage
To understand this potential impact, one must start with the current legal and regulatory ambiguity surrounding crypto dollars. Under the existing framework, the legal attributes of mainstream crypto dollar products remain in a gray area between payment instruments, prepaid value carriers, and even certain fund shares, with regulatory labels being highly fragmented, leaving room for arbitrage regarding whether and how to pay interest to holders. On one hand, issuers allocate a large amount of reserves to U.S. Treasury bonds and money market instruments, which can objectively yield returns close to those of money market funds; on the other hand, since they have not yet been uniformly recognized as traditional deposits or insured products, they are not subject to the same deposit insurance and capital adequacy constraints as commercial banks. This is one of the core issues of the regulatory debate—according to source C, a frequently heard voice in the market and policy circles is that “new legislation is needed to clarify the regulatory boundaries for interest payments on crypto dollars”, otherwise, interest distribution will evolve into regulatory arbitrage against the traditional deposit system. In stark contrast, public deposits absorbed by commercial banks must operate under multiple constraints such as deposit insurance, liquidity coverage ratios, and capital regulations; the interest rates they can pay to depositors are influenced not only by market rates but also by regulatory costs and stability targets. Meanwhile, crypto dollars park their reserves in treasury bonds and money markets, with their returns primarily distributed between issuers and institutional channels, and how, and to what extent, these returns are transferred to end holders currently lacks a unified standard. This asymmetry between regulatory requirements on the liability side and return distribution on the asset side is the source of interest rate arbitrage and is the part that banks are most wary of. It should be particularly noted that there are currently no definitive conclusions in publicly available information regarding potential future legal provisions or specific regulatory drafts; this article will not fabricate any unpublished details, but can only make scenario-based projections based on existing public debates and historical regulatory paths, rather than predictions of future regulatory outcomes.
Where Will the Funds Flow: From Bank Demand Deposits to Money Markets and On-Chain
Once crypto dollars officially distribute returns based on treasury bonds and money market instruments to holders, the issue of fund flow will no longer be an abstract assumption but will quickly evolve into a direct conflict at the pricing level. Currently, the overall market value of crypto dollars is approximately $1.8 trillion at the beginning of 2026 (external data), while the adjacent traditional dollar liquidity pool—the balance of the Federal Reserve's reverse repurchase agreements—recently stood at about $4.5 trillion (external data). In total, a potential migration path can be roughly outlined from “bank on-balance deposits—money market funds and reverse repos—on-chain crypto dollar assets.” When the reserves of crypto dollars continue to be parked in treasury bonds and money market instruments while also starting to distribute some interest to on-chain holders, the pricing system of zero or low-interest demand deposits at banks will be the first to face challenges. Fund holders will reassess between risk-free rates, ease of use, and compliance risks: for large and institutional deposits, which are most sensitive to price, even a few basis points of interest rate differential could motivate them to move some liquidity away from bank balance sheets, with a significant portion of funds potentially migrating along the chain of “large bank deposits—money market funds—crypto dollars.” In contrast, the migration of retail deposits may appear slower. Ordinary depositors face higher thresholds in account opening, KYC, tax reporting, and asset security, and are more reliant on user experience and brand trust; therefore, even when faced with higher risk-free returns on-chain, their response speed often lags significantly behind that of institutional funds. However, once large institutions and funds sensitive enterprises begin to reconstruct their liquidity management models, the retail side may exhibit a delayed secondary migration as payment ecosystems, payroll distributions, and consumer finance products gradually integrate on-chain dollars. It must be emphasized that both the $1.8 trillion stock of crypto dollars and the $4.5 trillion reverse repo balance can only provide a rough liquidity level; the future migration pace, peak, and return paths of funds among the three pools remain highly uncertain, and all related scenarios in this article should be viewed as hypothetical projections rather than predictions of a certain path.
After Deposits Are Withdrawn: Credit Contraction and Shadow Banking Re-expansion
For commercial banks, the so-called “core deposits” are not just an accounting item, but the foundation for building on-balance sheet credit assets. Mortgages, corporate loans, credit card balances, and various medium- to long-term financing all rely on a relatively stable and cost-controllable deposit base. Once trillions of dollars are withdrawn from the entire banking system, whether this outflow directly goes to crypto dollars or is transferred through money markets and reverse repos, banks will be forced to reassess their balance sheet structures, filling gaps at higher costs from wholesale markets or simply shrinking asset sizes. The result often means a comprehensive tightening of lending standards: marginal borrowers find it harder to access financing, and interest-sensitive businesses and households are forced to choose between higher financing costs and reduced capital expenditures, thereby squeezing investment and consumption demand in the real economy. Meanwhile, the linkage between deposit migration and Federal Reserve monetary policy cannot be overlooked. When banks are forced to raise deposit rates to retain funds, changes in policy rates can no longer linearly transmit to the credit market but must first compete with the returns of crypto dollars and money market funds, which will weaken the predictability of monetary policy and exacerbate the swings of the financial cycle between tightening and loosening. This outflow of funds from traditional on-balance sheet banks to on-chain assets and non-bank institutions essentially represents a “shadow banking re-expansion”: risks do not disappear into thin air but are transferred to areas with relatively insufficient regulatory coverage. The hardest hit are often not large banks with ample capital and diverse channels, but small and regional banks that rely on local deposits and have limited balance sheet flexibility; when their deposit base is eroded, they have fewer buffer tools at their disposal, thus posing systemic pressure on local mortgages, commercial real estate, and small business credit supply.
The Negotiation Table Between Banks and Crypto: Legislative Game and Cooperation Models
In this anticipated restructuring of the landscape, traditional banks will not passively wait for deposits to migrate but will seek to transform competition into a controllable game. The first potential path is to lobby and influence policy to tighten regulations, imposing regulatory requirements on interest payments for crypto dollars that are closer to those for deposits, bringing them under frameworks similar to deposit insurance, capital constraints, or liquidity ratios, thereby raising compliance costs for competitors and weakening the interest rate advantages brought by regulatory arbitrage. The second path is to explore issuing “self-owned crypto dollars” with complete regulatory backing, integrating on-chain technological capabilities with in-house settlement and clearing systems, allowing customers to enjoy the efficiency of on-chain transfers while still remaining within the influence radius of the bank's balance sheet. The third path is to collaborate with existing crypto dollar issuers, compliant custodians, and payment networks, incorporating on-chain dollar circulation into their own ecosystem, exporting capabilities in licensing, risk control, and compliance operations to replace some direct competition with cooperation. Correspondingly, the crypto industry is also seeking its long-term survival strategy. A pragmatic choice is to actively accept a regulatory label closer to money market funds, aligning with traditional money market funds in terms of asset duration management, liquidity buffers, and information disclosure, in exchange for legal certainty and compliance moats for distributing reserve returns to holders. Once this regulatory positioning is locked in, leading crypto dollar products will have the opportunity to outpace long-tail projects in terms of legal clarity and investor protection. From the perspective of legislative and regulatory bodies, the other end of this negotiation table represents a more macro balance: on one hand, it is necessary to prevent financial instability caused by blood loss in the banking system and protect resident deposits and credit supply; on the other hand, in the context of increasing global dollar competition, it is essential not to stifle technological innovations that enhance the programmability and cross-border usability of the dollar. How Congress and regulatory agencies balance “protecting the stability of the banking system” with “promoting financial innovation and dollar internationalization” will directly determine whether banks and crypto dollars will experience a zero-sum game or move towards integration under new rules in the coming years. As for whether Moynihan has officially testified before Congress, or whether the $6 trillion estimate has been written into official financial reports or 8-K documents, these remain pending verification and require checking official records for conclusions; this article only marks the status without extending any detailed descriptions.
Who Will Win This War for the Underlying Infrastructure of the Dollar
Returning to the main thread of the article, the debate ignited by expectations of interest payments essentially reveals a new competitive and cooperative landscape among bank deposits, money market funds, and on-chain crypto dollars. The reserve pool constructed by crypto dollars using treasury bonds and money market instruments provides a yield base similar to that of money market funds; traditional banks rely on deposit insurance and regulatory credibility to maintain a broad credit creation function, including mortgages and corporate loans; the Federal Reserve's reverse repos play the role of a funding parking pool and the lower limit of the interest rate corridor. Once the interest rates, risks, and regulatory requirements among the three are rearranged, the underlying logic of the global infrastructure of the dollar will also be rewritten. From a medium- to long-term perspective, a more realistic scenario is likely not the complete exclusion of one party, but rather a certain degree of coexistence and integration between banks and crypto dollars after the regulatory framework becomes clearer: large banks deeply participate in the circulation of on-chain dollars through proprietary products and cooperative platforms, while leading crypto dollars gain widespread adoption of institutional funds under stricter regulations, creating a more layered allocation structure among funds with different risk appetites and functional needs across the three major pools. For investors and industry participants, what is truly worth continuous tracking is not the daily price fluctuations or the marketing narratives of individual projects, but the evolution of three slow variables: the progress of relevant U.S. legislation and regulatory rules, changes in the asset structure of crypto dollar reserves, and the transmission methods of profit distribution to end holders. Whoever can first occupy the balance point of regulatory certainty and commercial viability on these three tracks is likely to gain a voice in the next round of financial infrastructure repricing.
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