Coinbase, which is one of the largest U.S. based crypto exchanges, has dismissed allegations that stablecoins threaten the country’s banking system.
In a blog post published Tuesday, the company dismissed the idea of “deposit erosion” as a “myth.” Coinbase was responding to arguments that suggested stablecoins erase liquidity in banks.
The exchange pointed out that recent research shows no notable association between the growth in stablecoin use and deposit losses at community banks.
Coinbase suggested that while stablecoins should not be viewed as substitutes for savings accounts, they are, however, payment devices.
For example, a business that buys stablecoins to pay overseas vendors is doing so for efficiency purposes and not due to a means of rescuing a personal savings account.
Criticism of Treasury Projections and Misaligned Assumptions
Coinbase also disputed estimates in a U.S. Treasury Borrowing Advisory Committee report, which estimated the generation of deposit flight-related demand with the growth of stablecoins as high as $6 trillion.
The exchange said the framework of the estimate was inconsistent with its market perspective of the stablecoin market, of only generates $2 trillion in total market cap by 2028.
“The math doesn’t add up,” Coinbase stated, likely implying regulators are over-exaggerating the expected risk.
This critique demonstrates the ongoing schism between policymakers with skepticism towards the growth of digital assets and industry actors, who view stablecoins as a complementary service to the banking system and not competitive with banking.
Also Read: Federal Reserve Governor Waller Backs Stablecoins, Promotes Its Banks & Non-Banks Usage
Stablecoins as a Tool for Global Dollar Expansion
Coinbase’s research paper also noted that most stablecoin activity takes place outside the United States, primarily in areas with less developed financial systems, such as Asia, Latin America, and Africa.
The International Monetary Fund reported that over $1 trillion of the $2 trillion stablecoin activity in 2024 originated outside the United States.
Coinbase indicated that because the vast majority of stablecoins are dollar-denominated, whether through bank deposits or US Treasury bonds, their acceptance globally is actually strengthening the dollar’s dominance in the global financial system.
Rather than undercutting U.S. banks, it is extending the dollar into new markets while only marginally affecting domestic credit availability.
Also Read: Taiwan to Unveil Draft Law Authorising Banks To Issue Stablecoins in June 2025
Banks Urged to Adapt Instead of Complaining
Coinbase’s position is related to increasing friction between banks and crypto firms.
Last week, Matt Hougan, Chief Investment Officer of Bitwise, described U.S. banks complaining about competition from stablecoins but still providing low yields to their depositors as them having worn that jacket for a long time.
He noted that banks have always enjoyed relying on the $187 billion annual revenue from swipe fees and are now seeing panic set in because stablecoins offer more competitive options.
Recently, banking groups have been accumulating government messaging through the Bank Policy Institute to encourage Congress to close what they view as loopholes within the Guiding and Establishing National Innovation for U.S. Stablecoins Act (GENIUS Act).
The GENIUS Act, as written, allows stablecoin issuers to indirectly provide yields for stablecoin holders through partnerships with exchanges.
Broader Global Debate on Stablecoins Intensifies
Coinbase’s endorsement of stablecoins comes as regulatory institutions and central banks around the globe try to assess the consequences of stablecoins.
Federal Reserve Governor Christopher Waller publicly endorsed stablecoins on February 11th, 2022, stating that banks and other financial firms should be allowed to deal in them as long as regulations encourage stability and promote innovation in pay-economies, UnoCrypto reported.
Conversely, on September 15th, we reported that the Bank of England proposed imposing strict limits on the usage of stablecoins. This sparked outrage from the crypto industry, which cautioned that it would only force innovation into other jurisdictions.
Meanwhile, we reported that the Bank of Korea has also weighed in on blockchain trends, with Governor Lee Chang-yong noting the potential for a stablecoin tied to the Korean won.
Both of these events highlight a clear divide between jurisdictions interested in seizing the opportunity to improve and modernize finance and those who choose to see them only as a systemic risk to traditional banking models.
Also Read: China Considers Letting Yuan-Backed Stablecoins Into Use To Boost Global Yuan Adoption