Coinbase Rejects Banks’ Stablecoin Deposit Worries

Claims by banks that the digital tokens threaten the financial system are just a way for lenders to protect revenue, according to a company blog post Shirzad wrote Monday (Sept. 15).

“The central claim—that stablecoins will cause a mass outflow of bank deposits—simply doesn’t hold up,” Shirzad wrote. “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.”

The real driver behind banks’ opposition is their desire to hold onto the money they earn from “a payment system that hasn’t fundamentally changed in decades,” Shirzad wrote. Stablecoins provide cheaper, quick ways to move money, thus threatening the $187 billion yearly “windfall” banks earn in swipe fees.

“This is a familiar playbook,” Shirzad wrote. “Banks fought ATMs, electronic check clearing and online banking, always warning of harm to consumers or financial stability, when in reality they were just trying to build regulatory moats to defend their profit streams from competition.”

Shirzad’s comments came weeks after banking industry groups, including the American Bankers Association, the Bank Policy Institute and the Consumer Bankers Association, warned that the GENIUS Act, signed into law in July, contains language that will allow some cryptocurrency exchanges to indirectly pay interest to stablecoin holders.

“Banks are concerned this would lead to an unequal playing field and trigger a wave of deposit outflows if customers decide they want to earn yield by holding stablecoins at crypto exchanges rather than keeping fiat currency at banks,” PYMNTS wrote Thursday (Sept. 11) in a report on the impact of stablecoins on community banks.

The problem for banks is being exacerbated by changes to federal policy. For example, the Office of the Comptroller of the Currency (OCC), long viewed as cautious when it comes to digital assets, has approved crypto and banking crossovers.

Last week, Comptroller of the Currency Jonathan Gould said that the crypto-related activities that many banks want to take part in are allowed under the law and that these activities should not be stigmatized.

“This change in regulatory posture is reshaping the competitive landscape, opening the door for companies built on blockchain rails to operate with many of the privileges of regulated banks,” PYMNTS wrote Thursday. “For small institutions that once relied on regulatory protection to slow FinTech encroachment, the walls could now be closing in.”