Coinbase’s Chief Policy Officer, Faryar Shirzad, in a recent blog post, strongly disputed claims from banks and trade bodies that stablecoins threaten traditional banking by siphoning off deposits. CoinDesk
He called the idea of “deposit erosion” a myth, saying analyses show no meaningful link between stablecoin growth and deposit outflows at U.S. community banks—and he argues there is no basis to believe larger banks would suffer worse. Coinbase notes that stablecoins are primarily used as payment tools for trading or cross-border transfers—not as long-term savings accounts. CoinDesk
Key Arguments & Data Points
| Argument | Explanation |
|---|---|
| Banks’ swipe-fee revenue threatened | Coinbase says banks are overstating risks because stablecoins threaten ~$187 billion/year in revenue from payment processing fees. |
| Scale of stablecoin market | The stablecoin market cap is around $290 billion, far smaller than what some claims of deposit drains imply. |
| Reserves & liquidity | Many stablecoins are backed by reserves held in regulated institutions and financial instruments; thus, moving into stablecoins may not remove money from banks entirely but shift its form. |
| International usage | A large portion of stablecoin transactions happen outside the U.S.—in places with weaker banking infrastructure—so the argument that stablecoins are draining U.S. deposits is seen as overblown. |
What Banks Are Saying
- Banking trade groups such as the Bank Policy Institute and the American Bankers Association have raised concerns that stablecoins could lead to a loss of deposits and weaken banks’ ability to lend.
- Some reports, including projections by advisory committees, have suggested that stablecoins could cause trillions of dollars of deposit flight over the next few years, if stablecoin adoption continues to grow rapidly.
Regulatory & Legislative Context
- The GENIUS Act recently became law in the U.S., providing a regulatory framework for stablecoin issuance. Banks have raised concerns about parts of the Act they believe might enable stablecoin issuers to indirectly offer yield-like features, which could intensify competition with deposits.
- In the U.K., the Bank of England is proposing caps on holdings of “systemic stablecoins” to guard against risks of deposit outflows and financial stability concerns. The proposals include limits such as £10,000 for individuals. Coinbase and other crypto groups have pushed back, saying these concerns are overstated. Financial Times
What It Means for Banks, Stablecoins, & Consumers
- For Banks: The claim that stablecoins threaten their deposit base may intensify pressure to innovate payment systems, offer competitive interest rates, or adapt business models. If the stablecoin adoption continues, banks could see pressure on fee-based revenues.
- For Stablecoin Issuers & Crypto Firms: Coinbase’s position aims to reassure regulators and the market that stablecoins can coexist with traditional banking without undermining it. Demonstrating transparency on how reserves are held and usage patterns will likely be important.
- For Consumers: If stablecoins become more common for payments and remittances, users may benefit from faster transactions, lower fees, and better cross-border payment options. But risks remain around oversight, regulation, and ensuring trust in stablecoin issuers.
Skepticism & Areas That Still Require Clarity
- Though Coinbase claims there’s no strong data showing deposit flight so far, critics argue that stablecoins are still relatively small compared to total banking deposits, so potential future risk might not yet be visible.
- Monitoring how stablecoins are used (by whom, for what types of transactions) will matter—if more people start using stablecoins as a substitute for savings, or if stablecoins are used to offer interest or rewards that mimic deposit returns, that could change the dynamics.
- Regulators are concerned about reserve quality, transparency, and possible systemic risks especially if stablecoins grow large, become central to payments infrastructure, or if issuers face financial stress.
Conclusion
Coinbase’s message is clear: It disputes claims that stablecoins are draining bank deposits, calling such concerns a myth. According to its policy head and recent analyses, stablecoins haven’t triggered deposit flight, especially among smaller banks, and are used more for payments and transfers than savings. However, as the stablecoin market grows, regulators, banks, and stablecoin issuers will need to maintain oversight, transparency, and robust frameworks to address real and potential risks.
