A recent report by Coinbase argues that the US government’s stablecoin activation policies are primarily designed to bolster the dollar’s global hegemony, thus serving this purpose rather than purely domestic ones.
The report challenges the notion that stablecoins threaten commercial banks’ deposit and lending functions, emphasizing the need to understand user demand and usage patterns.
Debunking the “Bank Killer” Myth
On Thursday, Faryar Shirzad, Coinbase’s Chief Policy Officer, pointed out on his X account that “The ‘stablecoins will destroy bank lending’ narrative ignores reality.”
He explained that the demand for stablecoins predominantly originates outside the United States, effectively extending the dollar’s global dominance. Shirzad drew a historical parallel, noting that similar concerns arose during money market funds (MMFs) advent.
“Stablecoins are doing for payments what money market funds did for savings: forcing innovation through competition,” Shirzad argued. “Faster, cheaper, programmable transactions aren’t a threat—they’re overdue progress.”
Yield Concerns vs Global Utility
Financial institutions on Wall Street have recently pressed for additional stablecoin regulations, particularly regarding interest payments. The GENIUS Act, enacted in July, prohibits interest payments on payment-oriented stablecoins. However, stablecoins outside direct payment contexts can still yield through DeFi or CeFi platforms.
Banking interest groups, including the American Bankers Association, the Bank Policy Institute, and the Consumer Bankers Association, have voiced concerns that such developments could lead to an outflow of bank deposits.
Massive Deposit Outflow Concern Is Not the Issue
A US Treasury Department study from April estimated a massive potential deposit outflow. Specifically, the study concluded that the banking system could lose up to $6.6 trillion if stablecoins enabled universal interest payments.
However, Coinbase’s report asserts that these arguments overlook the actual use cases for stablecoins. According to Coinbase, the majority of stablecoin demand comes from international users seeking “dollar exposure.” In emerging economies, stablecoins are leveraged as a “practical means of dollar access.” This is done to counter local currency depreciation or compensate for inadequate financial infrastructure.
The report also revealed that approximately two-thirds of all stablecoin transfers occur within decentralized finance (DeFi) and blockchain-based platforms. Coinbase clarified this by stating, “Stablecoins are a core element of a new financial infrastructure that runs parallel to, but independent of, the current US banking system.”
Shirzad reiterated his stance, emphasizing, “Though the banks could improve their services with stablecoins, treating stablecoins as a threat misreads the moment.” He concluded that stablecoins “strengthen the dollar’s global role and unlock competitive advantages that the US shouldn’t constrain.”
