In a recent blog post, Coinbase Chief Policy Officer Faryar Shirzad challenged the banking industry’s claims that stablecoins pose a significant threat to the financial system. Shirzad characterized these concerns as unfounded, arguing that they stem from banks’ desire to protect their revenue streams rather than genuine worries about financial stability.
He pointed out that the prevailing argument—that stablecoins could lead to a mass exodus of bank deposits—lacks substantive evidence. A recent analysis, according to Shirzad, indicates that there is no meaningful correlation between the rise of stablecoin adoption and significant deposit outflows from community banks. He maintained that the notion that larger banks would be adversely affected by stablecoins is similarly baseless.
Shirzad attributed banks’ opposition to the advent of stablecoins to their interest in maintaining the substantial profits generated from a payment system that has seen little innovation over the past few decades. He emphasized that stablecoins offer faster and cheaper methods for transferring money, potentially undermining the $187 billion a year that banks earn through swipe fees.
“This is a familiar playbook,” Shirzad noted. He recounted how banks had previously resisted technological advancements such as ATMs, electronic check clearing, and online banking, typically raising alarms about consumer welfare and financial stability. In reality, he asserted, these efforts were aimed at erecting regulatory barriers to protect their profits from emerging competition.
Shirzad’s statements come in the wake of concerns raised by several banking industry groups, including the American Bankers Association and the Bank Policy Institute, regarding the GENIUS Act signed into law in July. These groups argue that provisions within the act could enable cryptocurrency exchanges to indirectly offer interest to stablecoin holders, which they believe may create an uneven competitive environment. There is a fear that customers may choose to earn yields on stablecoin holdings at crypto exchanges instead of keeping their fiat currency in traditional banks, potentially leading to deposit outflows.
The situation is further complicated by evolving federal policies. The Office of the Comptroller of the Currency (OCC), traditionally cautious regarding digital assets, has recently approved collaborations between banks and cryptocurrency ventures. This shift in regulatory attitude was highlighted by OCC Comptroller Jonathan Gould, who indicated that activities involving cryptocurrencies that many banks wish to engage in are now permissible under current laws and should not be subject to stigma.
This regulatory change is seen as altering the competitive landscape by allowing companies based on blockchain technology to operate with privileges similar to those of regulated banks. For smaller financial institutions that historically relied on regulatory safeguards to fend off pressure from fintech companies, this newfound flexibility could pose significant challenges to their market position.
