TL;DR
- Coinbase refutes the idea that stablecoins compete with traditional savings accounts.
- The primary demand for stablecoins comes from outside the U.S., according to the exchange.
- Faryar Shirzad argues that these assets complement the banking system by improving payments.
Coinbase’s response was forceful regarding warnings from major U.S. banking groups, who suggest that the rise of stablecoins could be detrimental to the country’s financial system.
The exchange calls the fears that dollar-pegged tokens will cause deposit flight from stablecoins from conventional banks “unfounded and misleading.” According to Coinbase, these digital assets have important real-world applications that should not be overlooked.
Faryar Shirzad, Coinbase’s policy chief, argued in a recent note that the notion that stablecoins will destroy bank lending is incorrect. “Most of the demand for stablecoins comes from outside the U.S., which helps increase the dollar’s global influence rather than competing with your local bank,” Shirzad added.
This situation arises after banking groups urged Congress to establish limitations on services that offer yields on stablecoins, fearing they would compete directly with bank accounts.
The Myth of Deposit Erosion
In a recent publication titled “Rejecting the Banks’ Deposit Erosion Myth,” Shirzad emphasized that stablecoins are primarily used for payments and international transfers, not as substitutes for savings or checking accounts.
“The central claim that stablecoins will cause a mass outflow of bank deposits simply doesn’t hold up. These assets complement the banking system by improving payments, not competing with it,” he stated.
Coinbase also highlighted that most of the benefits in the ecosystem come from users in other countries seeking access to the dollar, especially in emerging markets, to protect themselves against the devaluation of their local currencies.
The exchange noted that approximately two-thirds of stablecoin transfers occur on decentralized finance (DeFi) platforms, operating largely independently of the national banking system.
Shirzad also addressed the concerns of community banks, indicating that the average stablecoin user differs from the typical bank customer. Coinbase projects that even if global circulation reaches $5 trillion, most of that value would be overseas or in digital settlement systems, not withdrawn from the more than $18 trillion in U.S. commercial bank deposits.
