Stablecoins Affecting The US Banking System “Is A Myth,” Coinbase Claims

Coinbase has rejected claims that stablecoins drain U.S. bank deposits. Here’s what Coinbase’s Faryar Shirzad had to say.

Coinbase is pushing back against long-standing claims that stablecoins weaken U.S. bank deposits. 

The company insists that the idea of large-scale deposit flight into digital tokens is a myth. 

Instead, it says stablecoins strengthen the U.S. dollar and offer faster, cheaper payment tools without draining the banking system.

Stablecoins Compete With Payment Fees, Not Savings

According to a recent blog post, Coinbase chief policy officer Faryar Shirzad argued that there is no meaningful link between stablecoin adoption and bank deposit outflows. 

He stressed that stablecoins are not savings products but merely payment instruments, used mostly for trading and cross-border transactions.

Shirzad also says that the real reason banks oppose stablecoins lies in payment revenues. U.S. banks and card networks earn about $187 billion each year from swipe fees. 

Stablecoins threaten this stream by allowing faster and cheaper transfers, while cutting out middlemen. This, he says, is what the banks fear.

He noted that the current resistance is similar to earlier battles over ATMs and online banking. Banks once argued that that those technologies carried systemic risks. However, the truth was far from the case, because they were merely defending their profits.

He said the same tactic is at play with stablecoins today.

There Is No Evidence Of Deposit Flight

Coinbase dismissed these banks’ projections of trillions in lost deposits due to stablecoin growth. 

For example, a U.S. Treasury Borrowing Advisory Committee report recently predicted $6 trillion in possible deposit flight by 2028. This is despite it predicting only a $2 trillion stablecoin market. 

Coinbase said this “Math doesn’t add up.”

At present, the total stablecoin market stands near $290 billion, according to CoinGecko and DefiLlama. That figure is too small to threaten trillions in bank deposits held at the Federal Reserve, Coinbase argued. 

If deposits were truly at risk, banks would be raising interest rates to keep customer funds, rather than leaving cash idle at the central bank.

Stablecoin Use Is Largely International

Coinbase noted that most stablecoin transactions take place outside the U.S. the comoany cited International Monetary Fund data, and noted that over $1 trillion of last year’s $2 trillion in stablecoin transactions occurred in Asia, Latin America and Africa.

Because major stablecoins are pegged to the U.S. dollar, their international use strengthens the dollar’s global role. 

Far from eroding U.S. credit markets, Coinbase said that this trend expands American influence in global finance.

Positive Links Between Banks and Crypto

Coinbase pointed to evidence showing that banks and stablecoin issuers can succeed together. After Congress passed the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act) earler this year, correlations between bank stocks and crypto firms like Coinbase and Circle turned positive. 

This indicates that both sectors can benefit when clear rules are in place.

Both sectors are showing a correlation after the GENIUS Act passage | source: ctfassets 

Calls for Banks to Improve Services

Some industry voices argue that U.S. banks should focus less on blocking stablecoins and more on improving their services. Matt Hougan, chief investment officer at Bitwise, recently criticised banks for offering low interest rates to depositors while complaining about competition.

He said stablecoins offer alternatives that show weaknesses in traditional banking, and instead of lobbying against them, banks should offer better value to customers.

Additionally, Banking groups like the Bank Policy Institute have urged Congress to restrict stablecoin issuers, especially around yield-related offerings. 

However, crypto advocacy groups like the Blockchain Association and Crypto Council for Innovation warn that these measures would tilt the advantages toward banks while stifling innovation.