Coinbase has taken a firm stance against concerns suggesting that stablecoins could jeopardize the stability of the US banking system. In a recent blog post, the cryptocurrency exchange termed the notion of “deposit erosion” as a myth, arguing that fears surrounding stablecoins siphoning bank deposits lack substantiated evidence.
The exchange pointed to what it described as “recent analysis,” contending there is no significant correlation between the rise of stablecoin usage and any substantial outflows from community banks. Coinbase noted, “Stablecoins don’t threaten lending — they offer a competitive alternative to banks’ $187 billion annual swipe-fee windfall.” The company clarified that stablecoins should not be viewed as savings accounts; rather, they serve as efficient payment tools. “When someone purchases stablecoins to pay an overseas supplier, they aren’t reallocating their savings — they’re opting for a faster, cheaper payment method,” it added.
Moreover, Coinbase criticized a recent report from the US Treasury Borrowing Advisory Committee, which had projected a possible $6 trillion in deposit flight amid forecasts of a $2 trillion stablecoin market by 2028. The exchange described this projection as mathematically inconsistent, stating, “The math doesn’t add up.”
Coinbase further examined the global landscape of stablecoin transactions, asserting that a significant portion occurs outside of the United States, particularly in regions that suffer from inadequate financial infrastructure. Citing data from the International Monetary Fund, the exchange reported that over $1 trillion of the anticipated $2 trillion in stablecoin transactions for 2024 is expected to happen internationally, especially in parts of Asia, Latin America, and Africa. The company argued that the primary use of dollar-pegged stablecoins abroad reinforces the US dollar’s standing in the global economy without adversely affecting domestic credit scenarios. Additionally, it indicated that there is a positive correlation between bank stock performance and engagement with crypto firms like Coinbase and Circle after the passage of the Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act), suggesting that stablecoins and banks can coexist beneficially.
In a broader context, Matt Hougan, the Chief Investment Officer at Bitwise, recently criticized US banks for voicing complaints about stablecoin competition without addressing their own service shortcomings, particularly regarding the interest rates offered to depositors. He argued that banks have traditionally underpaid depositors and are now in distress due to the competition posed by stablecoins.
Moreover, in August, US banking entities, including the Bank Policy Institute, called on Congress to address what they identified as a loophole in the GENIUS Act, which may enable stablecoin issuers to provide yields indirectly via crypto exchanges or affiliates. In response, the Crypto Council for Innovation and the Blockchain Association urged lawmakers to reject such proposals, warning that the suggested changes could disadvantage innovative financial solutions and favor traditional banking entities.
