In a recent blog post, Faryar Shirzad, the chief policy officer at Coinbase, challenged assertions made by the U.S. banking sector regarding the potential risks posed by stablecoins to the financial system. Shirzad dismissed these claims as myths created to protect bank profits, arguing that the fears surrounding stablecoins are unfounded.
He specifically addressed the notion that stablecoins could lead to a mass exodus of bank deposits, stating, “Recent analysis shows no meaningful link between stablecoin adoption and deposit flight.” This, he emphasized, applies to both community and larger banks, which continue to hold substantial amounts of money at the Federal Reserve. Shirzad pointed out that if deposits were indeed at risk, banks would be more aggressively competing for customer funds by offering higher interest rates instead of keeping their capital idle at the central bank.
According to Shirzad, the underlying issue driving banks’ opposition to stablecoins lies in the payments sector. Stablecoins, which are digital tokens pegged to real-world assets like the dollar, provide a faster and cheaper mechanism for transferring funds. This innovation could potentially disrupt an estimated $187 billion in annual revenue from swipe fees that traditional card networks and banks rely on. He likened the current backlash from banks to historical resistance encountered during the introduction of ATMs and online banking, where financial institutions expressed concerns about systemic risks while ultimately trying to safeguard their profits.
Shirzad also refuted forecasts that predicted huge sums of money, potentially trillions, would flow from traditional bank deposits into stablecoins. With the total market capitalization of stablecoins hovering around $290 billion, he highlighted that these digital tokens are mainly utilized for payment transactions, such as trading digital assets or sending money internationally, rather than being used as long-term savings options. He argued that individuals purchasing stablecoins for payments are not withdrawing money from traditional savings but are simply opting for a more efficient transaction method.
Encouraging banks to adapt to this new technology, Shirzad suggested that integrating stablecoin platforms could lead to faster settlement times, reduced correspondent banking costs, and the ability to facilitate 24/7 payments. He believes institutions that embrace this shift stand to gain significantly.
Meanwhile, the issue of stablecoins is also garnering attention in the U.K., as the Bank of England explores potential regulations. According to a report by the Financial Times, officials are contemplating limits on how many systemic stablecoins individuals and businesses can hold. Proposed thresholds could be set as low as £10,000 (approximately $13,600) for individuals and around £10 million for companies. The aim is to prevent sudden withdrawals that might weaken lending capabilities and overall financial stability, especially as certain stablecoins gain traction for everyday payments in the U.K.
