Coinbase says the stablecoin debate is about banks’ profits, not financial stability.
Coinbase has countered US banks’ criticism of stablecoins, arguing they strengthen, not weaken, the financial system.
Stablecoins have been one of the most discussed innovations in payments so far this year. Much of the attention has been positive, with the sector pointing to their role in cross-border payments.
Pegged to fiat currencies ( normally the US dollar) and settled on blockchain rails, stablecoins offer faster and cheaper international transactions without losing value in the process.
However, in recent weeks, they have attracted scrutiny in Washington and across the banking sector, with critics raising concerns about their impact on the wider financial system.
Banks and trade groups, make up one side of the debate, warning of potential risks to deposits and lending.
Coinbase sits on the other side, and has published a paper titled “Beyond the Deposit Debate: Why Stablecoins Complement Banks and Strengthen the Dollar”, aiming to counter these claims.
Banks sound the alarm
A coalition of banking associations, including the Bank Policy Institute, the American Bankers Association and the Independent Community Bankers of America, have stepped up their opposition to stablecoins following the recently passed GENIUS Act.
The law, passed in July 2025, stops stablecoin issuers from directly offering yield. However, it doesn’t block affiliates or partners from doing so. Banks say this creates a loophole that could pull money out of traditional accounts and into yield-paying stablecoin products.
Industry groups point to a US Treasury estimate warning that such products could cause up to $6.6trn in deposits to leave banks. Since banks use deposits to fund loans, they argue a large shift to stablecoins could raise borrowing costs for households and businesses.
“Payment stablecoins should not pay interest the way highly regulated and supervised banks do on deposits or offer yield as money market funds do,” a letter sent in August by the coalition read.
Coinbase responds
Coinbase pushed back, saying banks’ warnings don’t match reality. In its paper, the exchange argued there is “no meaningful link” between stablecoin use and deposit flight at community banks.
Instead, Coinbase says the debate is about profit, not lending. It points out that US banks hold $3.3trn in reserves at the Federal Reserve, earning $176bn in interest last year, over half of the sector’s pre-tax profits.
Coinbase also argues stablecoins aren’t savings products but payment tools, mainly used for digital asset trades and cross-border transfers.
The exchange also highlighted banks’ reliance on card fees, saying stablecoins could offer cheaper, quicker alternatives while ending a system where lower-income cash users subsidise rewards programmes for wealthier credit card holders.
Stablecoins are a payment innovation, not a threat to lending. What we’re witnessing is classic incumbent resistance: the largest banks are using fear to protect a lucrative, outdated payments monopoly,” Coinbase wrote.
“Surveys consistently find the public disaffected by the banking system – Congress taking action to entrench a system that so many Americans feel alienated from would be a mistake.
Market cooperation the answer?
Despite the debate, some banks are already working with stablecoins. JPMorgan Chase has launched its own stablecoin, JPM Coin, a dollar-backed token used for institutional payments and settlement between clients.
Other global lenders have piloted tokenised deposits or internal stablecoin projects, while US firms such as Bank of America have said they are waiting for regulatory clarity before moving forward.
“The choice is clear: protect bank monopolies, or protect consumers,” concluded Coinbase.
“Embrace innovation, or cling to the past. The future of payments — and US leadership in financial technology — depends on getting this right.”
