Should Commercial Banks Issue Stablecoins? Balance-Sheet and Regulatory Trade-Offs

This paper studies when issuing a dollar-backed stablecoin is privately viable for a regulated commercial bank. We develop a parsimonious partial-equilibrium model in which stablecoin issuance expands the bank's balance sheet, requires backing with highquality liquid assets, and interacts with liquidity and capital regulation. Profitability depends on whether stablecoins substitute for costly wholesale funding or cannibalize low-cost deposits, on the degree of balance-sheet consolidation, and on the interestrate environment through deposit-rate pass-through. We derive a simple profitability condition showing that issuance is viable only when funding savings exceed the net interest margin drag and regulatory costs of reserve backing. Comparative statics imply that issuance declines with consolidation intensity and deposit cannibalization and is most constrained at low nominal interest rates. A calibration using U.S. banking data illustrates that profitable issuance occurs only over a narrow range of monetary and balance-sheet conditions and is more likely under partial deconsolidation or greater wholesale-funding substitution.