A Citi executive has warned that offering yields on stablecoins could lead to a significant drain of deposits from the traditional banking system. The report, authored by Ronit Ghose, head of Citi's Future of Finance, estimates that as much as $6.6 trillion in bank deposits could be at risk of flowing into stablecoins if they become widely available and offer attractive yields.

The analysis draws a parallel to the rise of money market funds in the 1980s, which offered higher returns than traditional bank accounts and led to a similar outflow of deposits. This shift in the deposit landscape, Ghose warns, could lead to higher funding costs for banks, which would likely be passed on to borrowers in the form of higher interest rates.

The report highlights the potential for significant disruption to the banking sector as stablecoins and other digital assets become more integrated into the financial system.