tl;dr
Coinbase defends stablecoins against claims they threaten the U.S. banking system, calling "deposit erosion" fears a myth and arguing they drive innovation. The company states stablecoins, pegged to the dollar, are payment tools, not savings substitutes, and dismisses a U.S. Treasury report predicti...
**Coinbase Defends Stablecoins Against Claims of Bank System Threat**
In a bold rebuttal to growing concerns about stablecoins undermining the U.S. banking system, Coinbase has dismissed fears of “deposit erosion” as a “myth,” arguing that the digital assets are not a threat but a competitive force driving innovation. The crypto exchange’s Tuesday blog post directly challenged recent claims by the U.S. Treasury Borrowing Advisory Committee, which warned of a potential $6 trillion exodus of deposits due to stablecoin adoption—despite projecting only a $2 trillion stablecoin market by 2028.
**Stablecoins Aren’t Savings Accounts, Says Coinbase**
Coinbase framed stablecoins as tools for faster, cheaper payments rather than substitutes for traditional savings. “Someone buying stablecoins to pay an overseas supplier isn’t reallocating their savings—they’re choosing a faster, cheaper payment method,” the company wrote. It emphasized that stablecoins, which are pegged to the U.S. dollar, do not siphon deposits from banks but instead offer an alternative to the $187 billion in annual swipe fees banks collect from credit card transactions.
The exchange also dismissed the Treasury report’s dire projections, calling the math “flawed.” With stablecoins accounting for just a fraction of U.S. bank deposits, Coinbase argued that the risk of systemic instability is exaggerated. “There’s no meaningful link between stablecoin adoption and deposit outflows at community banks,” it stated, citing internal analysis.
**Global Stablecoin Use Boosts Dollar Dominance**
A separate paper from Coinbase highlighted that most stablecoin activity occurs outside the U.S., particularly in regions with underdeveloped financial systems. Citing the IMF, the report noted that over $1 trillion of the $2 trillion in stablecoin transactions in 2024 took place in Asia, Latin America, and Africa. This, Coinbase argued, reinforces the dollar’s global dominance without threatening U.S. credit availability. “Stablecoins expand the dollar’s reach without eroding domestic deposits,” the company said.
**Banks Need to Adapt, Not Panic**
The debate over stablecoins has also sparked criticism of traditional banks. Matt Hougan, chief investment officer at Bitwise, accused U.S. banks of “panicking” as stablecoins offer better alternatives to low-yield savings accounts. “Banks have long exploited depositors with low interest rates and now cry foul when competitors step in,” he said.
Meanwhile, banking groups like the Bank Policy Institute have pushed Congress to close a loophole in the GENIUS Act, which they claim allows stablecoin issuers to offer yields indirectly through crypto exchanges. The Crypto Council for Innovation and the Blockchain Association have pushed back, warning that such reforms would favor banks while stifling innovation.
**A Tenuous Coexistence**
Despite the clashes, Coinbase pointed to a positive correlation between bank stock performance and crypto firms like Circle following the passage of the GENIUS Act, suggesting that stablecoins and banks could coexist. Yet the battle over regulation and market share shows no signs of slowing.
As the conversation evolves, one thing is clear: stablecoins are reshaping finance—not by destroying traditional systems, but by forcing them to adapt. Whether that leads to collaboration or conflict remains to be seen.