Coinbase is pushing back against warnings from a major U.S. banking group that the rise of stablecoins could be detrimental to the country’s financial system. The exchange claims that concerns that dollar-pegged tokens will leverage traditional bank deposits are “unfounded and deceptive.”
According to them, these tokens have important real-world applications that should be overlooked. This is Coinbase’s policy manager, Faryal Shirzadstated that the notion that stablecoins will disrupt bank lending is inaccurate.
“Most of the demand for stablecoins comes from outside the US, helping to increase the dollar’s global influence rather than competing with local banks,” Shirzad added.
Coinbase champions stablecoins as payment tools
In a recent blog post entitled “Rejecting the Bank Deposit Erosion Myth”, Faryal Shirzad argued quite simply that stablecoins are primarily used for payments and cross-border transfers and are not a replacement for savings or checking accounts.
“The central argument that stablecoins will cause a mass outflow of bank deposits simply does not hold true. These assets complement the banking system by improving payments, rather than competing with it,” Shirzad said.
Previously, Shirzad provided market notes The debate over how stablecoins will affect bank deposits and loans highlights that they reflect similar concerns from innovations that have been around since the beginning, such as money market funds. However, the memo also considered the use of stablecoins.
The situation arose from the US banking group’s previous claims that stablecoins offering returns could rival bank accounts and funds could flow out of banks. Therefore, we asked Congress to place limits on services that provide stablecoin revenue.
When reporters asked Coinbase about the source of interest in its stablecoin ecosystem, the exchange said in a note that most of its stablecoin profits come from users in other countries seeking access to dollars, not U.S. consumers.
Coinbase also highlighted the importance of USD stablecoins in emerging markets. According to one cryptocurrency exchange, individuals in these markets prefer to use dollar stablecoins to protect themselves from local value loss. currency. This shows that the cryptocurrency community sees these tokens as a useful means of giving unbanked individuals access to dollars.
To date, approximately two-thirds of stablecoin transfers take place on decentralized finance or blockchain platforms. Coinbase said these transfers solidify the digital token’s position as the transactional backbone of a newly developed financial system that operates parallel to, but largely independently of, the national banking system.
Therefore, according to the crypto exchange, viewing stablecoins as a threat misunderstands the situation. Shirzad supported Coinbase’s argument, explaining that the token has improved the dollar’s standing globally and established a competitive edge that the United States should not limit.
Coinbase also addresses concerns faced by community banks. It condemned the widespread use of stablecoins and said the claims were baseless. This suggests that the average stablecoin user is different from the typical community bank customer.
GENIUS Act Increases Investor Confidence in Stablecoins
Shirzad points out that there is little overlap between community banks and stablecoin users, suggesting that banks can use stablecoins to improve their services. Meanwhile, Coinbase noted that predictions that trillions of dollars will move into stablecoins over the next decade require scrutiny.
“Even if global stablecoin circulation reaches $5 trillion, most of that value will still be stored overseas or tied to digital payment systems, rather than being withdrawn from checking and savings accounts in the United States,” the report explained.
Coinbase argued that there are over $18 trillion in commercial bank deposits in the United States, and stablecoins’ impact on these deposits remains limited. At the same time, the global influence of the US dollar will increase significantly.
Some large banks and important financial institutions have already launched stablecoin services, and some are planning to consider stablecoin services after the US enacted the GENIUS Act earlier this year. This law regulates the operations of stablecoin service providers in the country.
