Payments

Coinbase fights back against bank's claim of stablecoin deposit erosion

Banks claim stablecoins could threaten deposits. Coinbase calls foul.

Photo: Adobe Stock

September 16, 2025

Following Trump's signing of the GENIUS Act to regulate stablecoins, some banks have sounded the alarm of potential problems, including deposit erosion where banks will lose a significant amount of deposits due to stablecoins. However, Coinbase claims in a white paper entitled "Beyond the Deposit Debate: Why Stablecoins Complement Banks and Strength the Dollar," that this is a "myth."

"Recent analysis shows no meaningful link between stablecoin adoption and deposit flight for community banks, and there's no reason to believe big banks would fare any worse," Faryad Shirzad, chief policy officer at Coinbase, said in a blog.

Many banks are concerned depositors might move funds away from accounts into digital tokens. In particular, Rob Nichols, president and CEO of the American Bankers Association stated in a press release that, "stablecoins continue to risk disintermediating core bank activity like deposit taking and lending, which could undermine the fundamental role banks play in making loans to consumers and businesses."

The white paper from Coinbase makes a variety of arguments against this idea, including:

• Stablecoin transactions mainly occur through cross-border transactions, which strengths the U.S. dollar.
• Stablecoins provide onchain lending, which improves access to credit.
• Stablecoins are poised to challenge the U.S. payment ecosystem rather than deposits.

"Empirical evidence shows that stablecoin activity is overwhelmingly international, which substantially reduces any risk to U.S. bank deposits," the white paper stated. "Historical analysis on bank deposits and stablecoin market size-including research by Charles River Associates find no significant negative correlation over the last 4 years between the growth of stablecoins and changes in U.S. bank deposits, even for community banks."

Shirzad claims the real reason for this concern is because stablecoins threaten bank's "$187 billion annual swipe-fee windfall" as stablecoins could bypass these fees.

Instead, he argues banks should innovate with stablecoins as they have the potential to, "enable instant settlement, slash correspondent banking costs, and deliver 24/7 payments."

Many government agencies are pursing more pro-crypto policies such as the SEC, which aims to reduce regulatory burdens. At the same time, crypto ATMs are facing significant regulatory pressure from local and state governments due to rising numbers of bitcoin ATM scams.