Regional banks can no longer treat digital assets as a niche innovation. Jim Costa explores why institutions need to decide how digital assets fit into their future strategy as stablecoins, tokenized deposits and faster payment technologies reshape deposits, payments and lending. While highlighting opportunities such as faster settlement and greater traceability, Costa also examines the risks, particularly around liquidity and the speed of deposit movements.
Regional banks can no longer afford to treat digital assets as a niche innovation. Instead, they must determine whether to participate in an emerging financial ecosystem that has the potential to reshape deposits, payments and lending before competitors and new market entrants redefine the industry’s traditional business model, a senior banking executive warned.
Speaking at CeFPro’s latest Risk Americas event, Jim Costa, Chief Operating Officer at Banner Bank, said digital assets have rapidly become one of the most strategically important issues facing regional institutions.
While traditional risks such as credit, market and cyber remain critical, he argued that technological innovation has moved to the forefront of executive priorities because of its ability to transform how banks attract deposits, process payments and compete for customers.
“I think there is a strategic imperative today,” Costa said. “It kind of is a big deal.”
Drawing on experience at both large national institutions and regional banks, Costa explained that his own organization is actively evaluating how it should participate in digital assets and artificial intelligence. Rather than advocating a single solution, he encouraged banks to understand both the opportunities and the risks before deciding whether participation aligns with their long-term strategy.
Much of his argument centered on the extraordinary growth expected in digital assets. He pointed to industry forecasts suggesting that the stablecoin market could expand from approximately $300 billion today to between $1.9 trillion and $4 trillion within several years.
Even more significant, he suggested, is the potential emergence of tokenized deposits, which many believe could eventually become a digital extension of the traditional deposit market.
“The stablecoin market will be eclipsed by the tokenized deposits market,” he said, noting that global bank deposits already exceed $100 trillion, creating an enormous opportunity even if only a small proportion migrates to tokenized formats.
Costa argued that digital assets offer several compelling advantages. Tokenized deposits and stablecoins enable near-instant settlement, programmable transactions and greater traceability while supporting faster and potentially cheaper payment services.
Tokenized deposits also retain the protection associated with insured bank deposits, making them particularly attractive to regulated financial institutions.
However, he warned that those same characteristics introduce significant new risks.
Liquidity management emerged as one of his greatest concerns. Reflecting on the failures of Silicon Valley Bank, Signature Bank and First Republic, Costa observed that those institutions experienced unprecedented deposit outflows despite payment systems operating far more slowly than today’s digital infrastructure.
