Coinbase Challenges Banks Over Stablecoins Amid Regulatory Tensions
Coinbase disputes banks’ warnings that stablecoins could drain trillions in deposits. Chief Policy Officer Faryar Shirzad calls deposit erosion a myth as stablecoins approach $290B in market value under the U.S. Genius Act.
In the latest Coinbase vs banks stablecoin debate, Coinbase has pushed back against warnings from major U.S. banks that stablecoins could drain trillions of dollars from the traditional banking system. Faryar Shirzad, Coinbase’s Chief Policy Officer, called the notion of deposit erosion a myth, suggesting banks are primarily protecting their profits rather than highlighting genuine systemic risks. According to Coinbase, stablecoins are mainly used for settlement, trading, and cross-border payments, not as replacements for bank deposits.
Banks Raise Alarm Over Deposit Erosion
The banking lobby, including the American Bankers Association and the Bank Policy Institute, has warned that stablecoins could erode $6 trillion in deposits, potentially affecting banks’ ability to lend and maintain balance sheets. Coinbase countered that banks already hold trillions in reserves at the Federal Reserve, demonstrating that the risks associated with stablecoins are overstated.
U.S. Genius Act Stablecoin Law Strengthens Compliance
The discussion comes as the U.S. implements the Genius Act stablecoin law, the country’s first comprehensive legislation for dollar-pegged tokens. The law requires stablecoins to hold 100% reserves in dollars or Treasuries and report monthly. Coinbase maintains that this framework not only protects consumers but also facilitates the growth of the stablecoin market, which has surged to nearly $290 billion globally.
Competitive Dynamics Between Banks and Crypto Firms
Some banks argue that they cannot pay interest on stablecoins, creating a disadvantage compared with crypto exchanges. Coinbase rejects these concerns, emphasizing that stablecoins are transactional tools rather than savings accounts. “Buying stablecoins to pay an overseas supplier isn’t raiding savings,” Shirzad said, noting that users are simply opting for a faster and cheaper alternative to traditional wire transfers.
Global Adoption Underscores Dollar Utility
Data shows that the majority of stablecoin transactions occur outside the U.S., reinforcing the dollar’s global role. In 2024, of the $2 trillion in stablecoin transactions, $633 billion occurred in North America and $519 billion in Asia. These figures highlight that stablecoins are increasingly used for cross-border commerce, enhancing the dollar’s utility rather than threatening traditional banking deposits.
The Coinbase vs banks stablecoin debate reflects broader tensions between crypto firms and traditional financial institutions. While some players explore partnerships and hybrid products, others are erecting regulatory barriers to protect market share. Coinbase argues for a balanced approach: transparent regulation that allows innovation without compromising financial stability.
Opportunities and Risks for Crypto Users
Despite the tension, stablecoins offer significant benefits. They provide faster, lower-cost alternatives for global payments and trading while maintaining transparency. Coinbase emphasizes compliance, collaborates with regulators, and communicates continuously with the community to ensure users can safely and effectively use the tokens.
Looking Ahead
As the stablecoin market continues to grow, the debate between crypto firms and banks is likely to shape U.S. financial policy for years. Striking the right balance between innovation and oversight is crucial. Coinbase’s stance suggests that stablecoins can coexist with traditional banking while offering users more efficient financial tools.
