Coinbase Responds to Stablecoin Threat Claims
Coinbase has countered assertions that stablecoins pose a risk to the US banking system, labeling the notion of “deposit erosion” as a myth.
In a blog post published on Tuesday, the cryptocurrency exchange asserted that concerns over stablecoins siphoning off bank deposits are misguided. Coinbase noted that “recent analysis” indicates there is no substantial connection between the rise of stablecoin usage and deposit withdrawals at community banks.
“Stablecoins don’t threaten lending — they offer a competitive alternative to banks’ $187 billion annual swipe-fee windfall,” the exchange stated, emphasizing that stablecoins serve as payment tools rather than savings accounts. “Someone purchasing stablecoins to pay an overseas supplier isn’t reallocating their savings — they’re choosing a faster, cheaper payment method,” they added.
The company also contested recent claims from a US Treasury Borrowing Advisory Committee report, which anticipated $6 trillion in possible deposit flight, while only forecasting a $2 trillion stablecoin market by 2028. “The math doesn’t add up,” Coinbase asserted.
In a supplementary paper, Coinbase noted that the majority of stablecoin transactions take place internationally, particularly in areas with underdeveloped financial systems. The paper referenced the International Monetary Fund, indicating that over $1 trillion of the $2 trillion in stablecoin transactions in 2024 will occur outside the United States, mainly in Asia, Latin America, and Africa.
Given that almost all major stablecoins are pegged to the dollar, their international use bolsters dollar supremacy. Therefore, rather than diminishing US deposits, stablecoins contribute to enhancing the dollar’s global presence without significantly affecting domestic credit availability, the exchange contended.
Furthermore, it stated that correlations between the performance of bank stocks and crypto firms like Coinbase and Circle were positive following the passage of the Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act), illustrating that stablecoins and banks can coexist successfully.
Last week, Bitwise’s investment chief Matt Hougan criticized US banks for voicing concerns over stablecoin competition instead of enhancing their offerings, particularly regarding interest rates for depositors. He asserted that banks have historically taken advantage of depositors by providing low yields and are now reacting with alarm as stablecoins present superior alternatives.
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In August, US banking groups, spearheaded by the Bank Policy Institute, urged Congress to address a perceived loophole in the GENIUS Act that could permit stablecoin issuers to indirectly provide yields through crypto exchanges or their affiliates.
In response, the Crypto Council for Innovation and the Blockchain Association urged US lawmakers to reject the amendment, cautioning that the proposed changes would favor traditional banks while hindering innovation.
