Coinbase Defends Stablecoins Against Banking Threat Claims, Says ‘Math Doesn’t Add Up’

Coinbase published a comprehensive defense against banking industry claims that stablecoins threaten traditional financial stability, arguing the “deposit erosion” narrative is a “ myth ” designed to protect banks’ $187 billion annual payment processing ￰2￱ exchange released research titled “ Beyond the Deposit Debate ,” challenging Treasury estimates of $6 trillion in potential deposit outflows from yield-bearing ￰3￱ Challenges Banking Industry’s Deposit Flight Claims The defense comes as five major ￰4￱ trade organizations lobby Congress to tighten GENIUS Act regulations, warning that stablecoin platforms offering competitive yields could trigger mass deposit flight similar to the 1980s money market fund ￰5￱ analysts particularly compared current dynamics to those of the 1980s , when money market funds expanded from $4 billion to $235 billion in seven years, draining traditional bank deposits.

However, Coinbase argues that banks park $3.3 trillion in Federal Reserve reserves, earning $176 billion risk-free annually rather than extending additional loans, contradicting claims of deposit ￰6￱ company contends most stablecoin activity occurs internationally, strengthening the U. S. dollar’s global role without significantly affecting domestic ￰7￱ stablecoin market has grown from $4 billion in 2020 to over $285 billion today, with projections reaching $1 trillion in annual payment volume by 2030 and potentially comprising 10% of the ￰8￱ ￰9￱ executive warns stablecoin interest payments could drain bank deposits like the 1980s crisis amid GENIUS Act loophole concerns. #Stablecoin #Banks ￰0￱ — ￰10￱ (@cryptonews) August 25, 2025 Banks Fight Innovation While Exploring Stablecoin Opportunities Themselves Last month, major banking associations, including the American Bankers Association and Bank Policy Institute, urged Congress to close perceived GENIUS Act loopholes allowing crypto exchanges to offer stablecoin ￰11￱ groups cite Treasury estimates that yield-bearing stablecoins could trigger $6.6 trillion in deposit outflows, fundamentally altering bank funding ￰12￱ banking lobby warns that joint marketing arrangements between issuers and exchanges could accelerate deposit flight during financial stress, reducing credit supply and raising borrowing costs.

However, platforms like Coinbase and PayPal continue offering stablecoin yields , arguing that prohibitions apply only to issuers rather than ￰13￱ opposition faces contradictions as major institutions simultaneously explore stablecoin ￰14￱ CEO Jane Fraser confirmed the bank is “looking at the issuance of a Citi stablecoin” while developing tokenized deposit services for corporate clients seeking 24/7 settlement ￰15￱ in June, JPMorgan also launched JPMD deposit tokens for institutional blockchain payments while CEO Jamie Dimon was questioning its use ￰16￱ bank served as lead underwriter for Circle’s IPO, which has climbed over 500% since its $31 offering ￰17￱ also appears that some institutions are showing approval to control stablecoins, as seen in the recent Bank of England’s proposal for strict ￰18￱ bank caps between £10,000 and £20,000 for individuals and £10 million for businesses, which triggered widespread backlash.

UK’s central bank wants to cap how much stablecoin people can hold, but crypto groups are fighting back, warning the move could choke innovation and leave Britain trailing rivals. #bankofengland #stablecoins ￰1￱ — ￰19￱ (@cryptonews) September 15, 2025 Critics argue that the approach puts Britain at a disadvantage compared to the ￰20￱ the European Union, which have embedded stablecoins into their financial systems without such ￰21￱ Adoption Accelerates Despite Regulatory Pressure Earlier this month, Fireblocks launched a stablecoin payment network with over 40 institutional participants, including Bridge, Circle, and Zerohash, processing $212 billion in monthly ￰22￱ multi-stablecoin infrastructure supports seamless cross-border transfers and regulatory compliance across different token ￰23￱ reveals 90% of financial institutions actively use or explore stablecoin integration, with major corporations including Amazon and Walmart reportedly considering stablecoins to reduce transaction ￰24￱ to Coinbase, Bitwise CIO Matt Hougan criticized banking complaints about competition , arguing banks should offer better deposit rates instead of “ abusing depositors as a free source of capital for decades .” Average ￰25￱ accounts yield 0.6% while stablecoin platforms offer up to 5% returns, creating competitive pressure.

Coinbase’s research found no meaningful correlation between stablecoin adoption and deposit flight for community banks over the past five ￰26￱ price correlations between major banks and crypto firms like Coinbase and Circle remain positive at 14%, indicating investors view stablecoins as complementary rather than competitive.