“It is very likely going to be one of the largest disrupters of community banking we’ve ever seen,” he said.
Richards said $40,000 has flowed out of customer accounts to crypto investments over the past 90 days alone.
While that is minor for a lender with $330 million in assets, he worries it is a sign of what is to come.
“It’s a relatively small amount now for us.
But … it’ll only be exacerbated if the issuers of stablecoins, or the exchanges that are involved, are going to be allowed to pay interest or rewards.
That’s just going to accelerate that deposit outflow, even more than now,” Richards said.
Whether that could lead to a silent bank run remains a major concern for local operators.
“That’s the question of the day,” Richards said.
If deposits dwindle, banks will have to find more expensive funding, pushing up costs and restricting loans for local borrowers.
“These crypto issuers are not in our local communities.
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They can’t sit across the desk from a farmer, or from a small business owner, and counsel with them on how to improve their business.
They don’t sponsor the local little league team, they don’t buy ads in the local high school yearbook, and they’re not paying local ‘ad valorem’ taxes,” Richards explained.
While some crypto advocates argue that stablecoin reserves will end up being held at traditional banks, Richards said that is unlikely to make up for community lenders’ losses.
