Coinbase has launched a comprehensive defense against banking industry claims that stablecoins threaten traditional financial stability, arguing that the "deposit erosion" narrative is a "myth" designed to protect banks' $187 billion annual payment processing monopoly. The exchange released research titled "Beyond the Deposit Debate," directly challenging Treasury estimates of $6 trillion in potential deposit outflows from yield-bearing stablecoins.
The defense comes as five major U.S. banking trade organizations lobby Congress to tighten GENIUS Act regulations, warning that stablecoin platforms offering competitive yields could trigger mass deposit flight similar to the 1980s money market fund crisis. Citigroup analysts compared current dynamics to the 1980s when money market funds expanded from $4 billion to $235 billion in seven years.
However, Coinbase argues that banks park $3.3 trillion in Federal Reserve reserves, earning $176 billion risk-free annually rather than extending additional loans, contradicting claims of deposit shortages. The company contends most stablecoin activity occurs internationally, strengthening the U.S. dollar's global role without significantly affecting domestic deposits.
The stablecoin market has grown from $4 billion in 2020 to over $285 billion today, with projections reaching $1 trillion in annual payment volume by 2030 and potentially comprising 10% of the U.S. money supply. Research reveals 90% of financial institutions actively use or explore stablecoin integration, with major corporations including Amazon and Walmart reportedly considering stablecoins to reduce transaction fees.
Coinbase's research found no meaningful correlation between stablecoin adoption and deposit flight for community banks over the past five years. Stock price correlations between major banks and crypto firms like Coinbase and Circle remain positive at 14%, indicating investors view stablecoins as complementary rather than competitive.