Coinbase Challenges Fears of Deposit Flight Linked to Stablecoins

The exchange argued that most stablecoin activity occurs internationally, and actually reinforces US dollar dominance without undermining domestic credit. The debate attracted sharp responses from a number of people in the industry, with critics like Bitwise’s Matt Hougan accusing banks of resisting competition instead of improving deposit rates. On the other hand, banking groups pushed Congress to tighten stablecoin rules.

Coinbase Pushes Back on Stablecoin Warnings

Coinbase pushed back against claims that stablecoins pose a threat to the US banking system, and dismissed concerns about “deposit erosion” as a myth. In a Tuesday blog post, the exchange argued that stablecoins do not drain bank deposits and instead act as payment tools rather than savings accounts. 

According to Coinbase, someone using stablecoins to pay an overseas supplier is not shifting savings away from banks but simply opting for a faster, cheaper transaction method. The company also criticized a recent US Treasury Borrowing Advisory Committee report that projected $6 trillion in potential deposit flight by 2028, despite only forecasting a $2 trillion stablecoin market.

Blog post from Coinbase

Coinbase pointed out that most stablecoin activity takes place internationally, particularly in Asia, Latin America, and Africa, where they serve as a critical payment tool in regions with weaker financial infrastructure. The company said that this global usage reinforces the dominance of the US dollar rather than undermining it, and does not materially impact domestic credit availability. 

The exchange also mentioned that after the passage of the GENIUS Act, correlations between bank stocks and crypto firms like Coinbase and Circle turned positive, which suggests that banks and stablecoins can thrive together.

This debate attracted voices across the financial industry. Bitwise’s investment chief Matt Hougan recently criticized US banks for focusing on stablecoin competition rather than improving their own offerings, particularly deposit rates. He argued that banks have long taken advantage of customers with low yields and are now panicking because stablecoins present better alternatives. 

Meanwhile, banking groups led by the Bank Policy Institute urged Congress to close what they view as a loophole in the GENIUS Act that could allow stablecoin issuers to indirectly offer yields through exchanges or affiliates. Crypto advocacy groups, including the Crypto Council for Innovation and the Blockchain Association, countered that such revisions would unfairly advantage traditional banks and stifle innovation.