The warning comes as public comment periods have already opened at the US Treasury, and regulators are expected to write the rules that make the new law operational.
One estimate cited by banking groups puts potential deposit outflows as high as $6.6 trillion if the law is interpreted broadly. That number has made small bank leaders uneasy. They fear losing the stable deposits they use to lend to families, farmers, and local businesses.
Many community banks operate on thin margins. They rely on local deposits to underwrite loans for crop seasons, equipment purchases, and small shops.
Based on reports, Kelley warned that those lifelines could be weakened if large sums move to new digital products outside the traditional banking system.
Farmers and small business owners were named as especially vulnerable, because local lenders often offer terms tailored to seasonal needs.
Reports have disclosed that some banking groups and lawmakers want tighter definitions and clearer guardrails before the rules are finalized. Supporters of the law argue it could bring more clarity to stablecoin markets, but opponents say that the details matter most.
If deposits start to leave, small banks could be forced to cut back on loans or raise rates to retain customers. That outcome would likely shift credit away from local borrowers toward larger financial centers.
Featured image from Brian Lyman/Alabama Reflector, chart from TradingView
