The Quiet Spread, Four Months Later: Already on the Trajectory

What 122 community banks' transaction data tells us about the deposit migration underway

A note to readers before we begin.

The analysis in this piece is built on data and research produced by Kim Snyder and her team at KlariVis. Kim is the CEO and founder of KlariVis, the data intelligence platform whose 122-bank dataset, 17-month transaction-level analysis, and deposit-product breakdowns form the empirical foundation of everything that follows. The original Quiet Spread report from February — and the May 2026 update that extends it — are her work and the work of her team.

Thank you Kim for joining forces on this one. With that said: here is what we are seeing.

The question we want to put in front of community bankers is not whether digital assets pose a risk to the deposit base. Most of us have already worked that one out. The question is what path we are already on. The data suggests it is clearer — and further along — than the public debate acknowledges.

Section 404 of the CLARITY Act is the immediate motivation for this piece. Senators Tillis and Alsobrooks declared their compromise final on May 5. How much influence Coinbase CEO Brian Armstrong had may be evident in his three-word response: ‘Mark it up.’ We’ll let you decide. The trade groups responded immediately that the yield prohibition language falls short. Senate Banking Committee markup is being prepared and could come within days. The fight is real and active. But stablecoin adoption continues moving forward whether or not Section 404 ultimately constrains yield-bearing products.

Four months ago, KlariVis published transaction data from 92 community banks showing customer fund flows to Coinbase. The piece was called The Quiet Spread. The analysis has since extended: 122 institutions across more than 30 states, all major exchanges, 17 months of data through April 2026. What the data shows is that customers are routinely moving money from community bank accounts to crypto platforms — at almost every community bank we measured, in patterns that have held across a full crypto market cycle. That’s the floor. That’s where we are.

Where this goes next depends on dynamics not yet fully visible in the data: payment-use stablecoins gaining traction, potential legalization of yield-bearing stablecoins, and tokenized securities scaling across blockchain settlement rails. Each stage broadens the competitive pressure on deposits by building on customer behavior already underway.

We’ve tried to write the analysis so the data does the work and the trajectory question stays open. What we are not doing in this piece is offering readiness recommendations — those will come in future writing as the market structure legislation develops. Our goal here is to make the deposit migration itself clearer.

Let’s walk through what the data says, where this may be heading, and what it means for how banks advise customers. Why? Because our customers will look to us for guidance as this new financial architecture develops. At the end of the day, they still trust their bank.

Where we are: what the data shows

Of the 122 community banks in our updated dataset, 113 (93 percent) show meaningful crypto-platform transaction activity from their customers. That number is up from 90 percent in the original Coinbase-only analysis. When all major exchanges are included, the broader penetration figure rises further. Of the 84 original banks still in the dataset, 96 percent show meaningful activity. The pathway for moving money between community bank deposits and crypto platforms is built and active at virtually every community bank we measured.

For the 52 banks where we can reliably tell which direction money is moving (out to a crypto platform, or back into a bank account), the picture is clear. Customers moved $154.8 million to crypto platforms over 17 months. They brought back $76.5 million. That’s a 2-to-1 outflow ratio sustained across a full crypto market cycle. By transaction count, 91 percent of all crypto-platform activity over the 17 months was outflow. Thirty-eight of the 52 banks (73 percent) showed net outflows over the full period.

The persistence matters most. When Bitcoin pulled back below $65,000 in early 2026, the outflow-to-inflow ratio moderated. It went from a high of 5.5:1 during the post-election rally in early 2025 down to 1.44:1 in Q1 2026. But it did not reverse. Money continued to leave through a Bitcoin downturn, just at a slower pace. When Bitcoin climbed again in April, the ratio snapped back to 2.34:1 at the same banks.

Outflow ratios moderate when Bitcoin falls but do not reverse, then re-accelerate when Bitcoin climbs. Speculative cycling, with persistent directional bias.

The activity is clearly speculative, but the directional bias persists across market conditions. Whether Bitcoin is rallying, falling, or recovering, customers are net-moving money toward crypto platforms, not away from them. We want to be clear about what that does and doesn’t mean. The dollar volumes are too small relative to the deposit base to constitute structural deposit flight today. The 52 banks in the directional sample have aggregate deposits in the range of $89 billion. Roughly $78 million in net outflows against that base is less than one-tenth of one percent over 17 months. Today’s flows are speculative trading activity, not deposit substitution. But they are also not bidirectional in the way a healthy two-way trading channel would be. The movement is predominantly occurring in one direction, regardless of what crypto is doing.

The more useful question, for a community banker thinking about institutional exposure, is which customers are producing the directional bias. A 91 percent outflow rate by transaction count, sustained across 17 months and across crypto market cycles, isn’t distributed evenly across a customer base. It concentrates somewhere. The May data lets us see where.

When we break the directional sample down by deposit product, the pattern is clean.

A note on reading the chart. “Outflow rate” measures the share of crypto-platform transactions that flowed out of bank accounts. A rate above 50% means money is, on net, leaving. Savings is the one product type where the majority of transactions are inflows — customers bringing money back from crypto exchanges into their savings accounts.

The yield-sensitivity gradient is visible in the data. The more rate-sensitive the deposit product, the more one-directional the flow.

The gradient is explained by one variable: how rate-sensitive the customer in that deposit product is by self-selection. Money market customers have already revealed something about themselves by holding the product. They accepted minimum balance requirements, transaction limits, and operational overhead in exchange for incremental yield. They could have left their cash in checking. They didn’t. The 96 percent outflow rate from money market accounts is what those customers do when a higher-friction, higher-risk yield channel is available to them. Savings accounts sit at the other end of the gradient. Savings customers are typically lower-balance, longer-tenured, and less rate-sensitive almost by definition. If they were rate-sensitive, they’d be in money market accounts. The intermediate outflow rate in checking and DDA is what you’d expect from a mixed population of rate-sensitive operators (small business owners, professionals managing operating cash) and customers using checking as their default.

This is where we observably are. The behavior exists at virtually every community bank. The flows are sustained across crypto market cycles. The customers producing the directional bias are identifiable: rate-sensitive money market holders, moving $3,232 at a time, repeatedly, in a pattern that hasn’t shifted in 17 months. Today’s behavior remains bounded by crypto-asset volatility. The next question is what happens as that volatility declines.

Where it goes from here

The behavior we observe today is bounded by what’s on the other side of the flow: exposure to volatile crypto assets. A customer who moves $3,000 from a money market account to Coinbase in a given month is taking position-sized exposure to potential loss of principal. That risk is what keeps the average ticket at $3,000 instead of $30,000. It’s also what keeps the net outflow rate persistent but limited. Money market customers are willing to accept that risk to capture yield-like outcomes. The question is what happens as the asset on the other side of the flow changes. And it is changing, in three distinct ways.

The first change is already underway. Stablecoins are becoming payment infrastructure independent of yield. Visa, Mastercard, and PayPal have integrated stablecoin settlement into their networks. Stripe acquired Bridge to bring stablecoin payments into its merchant base. PayPal’s PYUSD circulates at meaningful scale. Cross-border B2B payments increasingly settle in stablecoins because the alternative (correspondent banking with two-day settlement and high fees) is operationally worse. None of this requires the stablecoin to pay yield. The stablecoin is doing a job traditional bank rails don’t do as well: instant settlement, programmable money, 24/7 availability, low cost.

What this means for deposits is that customers begin holding stablecoin balances for utility reasons. A small business that starts accepting USDC for B2B payments holds operating cash there. A treasury function managing cross-border subsidiary funding holds working capital there. A consumer using a stablecoin-enabled wallet for international remittance holds a balance there. None of those customers needs the stablecoin to pay yield to consolidate cash there. The stablecoin balance grows because the stablecoin is useful. The cash it grows from comes, directly or indirectly, from somewhere. Often from a bank account. Unless banks develop a strategy to participate in the flow rather than simply observe it — but more on that in future writing.

The second change is conditional on Section 404, and it’s what the trade groups are fighting. If yield-bearing stablecoin products become legally permissible, the customer already comfortable with holding crypto or holding a stablecoin balance for payment reasons now has a reason to grow that balance. The customer not yet holding one has a reason to start. The 96 percent outflow rate from money market accounts that the data documents is the pattern produced when rate-sensitive customers have a high-friction, high-risk yield channel available and use it anyway. Replace the volatile asset on the other side with a stable instrument paying 4-6 percent and the same customer behavior scales materially. How materially it scales remains uncertain, but the directional incentive is obvious. Section 404 is the contest over whether this stage activates with regulatory blessing or stays constrained. The trade groups are right to fight it. Their objections are well-founded. The carve-out language for “duration, balance, and tenure” rewards is broad enough to permit substantial gateway-level evasion if the implementing rules don’t tighten it. That fight matters.

The third change matters even if Section 404 holds exactly as the trade groups want it to. Once a customer holds a stablecoin balance — for trading, for payments, for any reason — that customer is on the rails that connect to an emerging ecosystem of tokenized investment products. Today, accessing products like BlackRock’s BUIDL, Franklin Templeton’s BENJI, or Ondo’s OUSG still requires accreditation, separate onboarding, and platforms that don’t yet integrate seamlessly with retail crypto exchanges. The shift is toward removing those frictions. BUIDL, a tokenized fund that holds short-duration Treasuries and money market instruments, grew from launch to over $2 billion in under a year. BENJI is scaling on a similar growth pattern. WisdomTree’s tokenized money market funds and a growing list of tokenized money market and Treasury products are reaching market. These are not stablecoins. They are tokenized investment products that pay yield through investment returns rather than through deposit-like interest. They sit outside Section 404’s specific yield-on-stablecoin prohibition. The broader regulatory framework addresses tokenized investment products through different channels — primarily the existing securities framework, where tokenization is treated as a delivery method rather than a new asset class — but the Section 404 fight over stablecoin yield is not the same fight as the regulation of tokenized money market funds. The deposit-substitution dynamic operates across both regulatory frames. As the tokenized investment ecosystem matures and stablecoin platforms integrate tokenized products natively, the customer who holds a stablecoin balance will be effectively one click away from a tokenized money market fund position — with no rebanking, no settlement delay, no relationship friction. That collapse of friction is well underway.

The combined effect of the three changes describes the deposit flight risk we continue to analyze. Today, stage one: customers move money to crypto exchanges for speculative trading, in bounded amounts, in a pattern that has held across 17 months. Near-term, stage two: customers begin holding stablecoin balances for payment reasons, drawing operating and working capital out of bank accounts to do so. Mid-term, stage three: yield-bearing stablecoins, if permitted, give the customer who already holds a balance for payments a reason to grow it, and the customer not yet holding a balance a reason to start. Longer-term, stage four: the stablecoin balance is the on-ramp to tokenized money market funds and tokenized Treasuries that compete with bank deposits at institutional pricing accessible 24/7 from infrastructure the customer is already using.

Each stage extends the competitive surface for community bank deposits. Each stage is harder to address than the one before it. Each stage builds on customer behavior that’s already in place at virtually every community bank reading this piece. And the customer base broadens with each stage. Stage one is the rate-sensitive segment we identified in the data. Stage two broadens the exposure to commercial operating cash and treasury activity. Stage three reaches any retail customer with idle cash they would prefer to earn return on. Stage four widens further to investors who don’t currently engage with crypto rails at all. The data names the leading edge of this dynamic. Each subsequent stage pulls in customers behind it.

The Section 404 fight is the contest over stage three. Stages one, two, and four happen on their own trajectories.

What the last time this happened looks like

The trajectory has a precedent. Not a perfect one. Historical parallels never are. But this one is close enough in structure to be worth looking at carefully.

In April 1977, Merrill Lynch introduced the Cash Management Account. The CMA combined a securities brokerage account, a money market fund, a checking account, and a Visa card into a single integrated product. The customer kept idle cash in the money market fund, which paid yields tied to short-term interest rates. The customer wrote checks against the cash balance and used the Visa card for transactions. From the customer’s perspective, the CMA functioned as a bank account that paid significantly higher yield than any bank could legally offer.

The reason banks couldn’t compete was Regulation Q, which had capped the interest banks could pay on deposits since 1933. By the late 1970s, with short-term Treasury yields running at 8 to 10 percent and rising, the gap between what bank deposits paid and what money market funds paid created a structural arbitrage. The CMA was the gateway. Money market funds were the destination. Reg Q was the regulatory framework that prevented banks from competing.

The migration was rapid. Money market mutual fund assets grew from roughly $4 billion at the start of 1977 to $235 billion by the end of 1982. That growth came overwhelmingly from bank deposits, particularly from the higher-balance customer segment most exposed to the yield differential. By the time Congress passed the Garn-St Germain Depository Institutions Act in October 1982 (which finally authorized banks to offer money market deposit accounts at competitive rates) five years of migration had already happened. The high-balance customers who had moved their cash did not come back. The migration had crystallized into a permanent shift in how rate-sensitive customers managed idle cash.

The structural parallel to the current moment is closer than it might appear. Then, the CMA was the gateway and money market funds were the destination. Now, stablecoins are the gateway and tokenized money market funds, tokenized Treasury funds, and other tokenized yield products are the destination. Then, Reg Q created the regulatory friction that prevented banks from competing. Now, the friction is the operational and regulatory difficulty of offering the seamless 24/7 cross-product integration that crypto rails provide. Then, the regulatory framework caught up after five years. Now, the implementing rules for Section 404 will take effect roughly two years after enactment, in an environment where the destination ecosystem is already developing.

The institutions that fared best engaged early — measuring customer behavior, adapting products, and responding before the migration crystallized. They prepared for a competitive environment in which they would have to win rate-sensitive customers actively rather than retain them passively. The institutions that fared worst waited for the regulatory framework to catch up. By the time Garn-St Germain authorized competitive bank money market accounts in 1982, the customers most likely to use them had already moved.

The most consequential difference between then and now is what community bankers can see. Banks in the late 1970s could observe deposits leaving in aggregate. They could not identify which customers were leaving, which products were most exposed, or how the migration was accelerating in their own customer base. The visibility tools didn’t exist. They were responding to a phenomenon they couldn’t measure in real time at their own institutions.

Community bankers today can. The data this piece is built on is institution-level transaction data, the kind sitting in every community bank’s core systems but historically buried beneath aggregation, formatting, and the operational difficulty of asking the right questions of it. The KlariVis platform that produced this analysis is capable of surfacing the data at the institution level. The 122-bank dataset is what aggregation looks like. The same query can run at any individual bank for institution-specific results.

The question worth sitting with

We started with a question: what trajectory are we already on, and what shape does it have?

The data identifies the leading edge of the migration: rate-sensitive customers repeatedly moving funds from community bank deposits to crypto platforms across multiple market cycles. Today, the behavior remains bounded and largely speculative. But as stablecoins evolve from speculative instruments into payment infrastructure — and eventually into gateways to tokenized yield products — the competitive dynamics around deposits begin to change.

What the historical record tells us is that this kind of deposit flight has happened before, that the institutions that engaged with it early fared better than the institutions that waited, and that the most consequential difference between the last time and this time is what community bankers can now see in their own data.

Where institution-specific data does the most work is in the implementing rulemaking that follows enactment. Legislative text gets negotiated by senators, staff, and trade group lobbyists. Implementing rules get drafted by career regulators who need empirical grounding for the line-drawing they will be doing. Trade group letters carry institutional weight. Academic submissions carry analytical rigor. Institution-specific transaction data carries something neither does: ground-truth visibility into how actual bank customers behave at the level of individual accounts. That kind of evidence is rare, valuable, and increasingly relevant to the rules being written. The community bankers who have it, and who choose to share it through comment letters or through their trade groups’ submissions, are providing regulators with a kind of input the regulators cannot get anywhere else.

The question we want to leave with community bankers is what the customer behavior means for your institution specifically. For your customer base. Your deposit composition. Your competitive position. Your operational readiness. That is a question your data can answer in ways the aggregate data we have presented in this piece cannot. Community banks may not control where the market structure goes from here. But they still control whether they understand what is happening inside their own customer base before the migration becomes visible in aggregate.