U.S. banking associations have recently increased pressure on Congress to limit yield-bearing products linked to stablecoins. They claim these dollar-pegged cryptocurrency tokens could trigger a massive outflow of clients from traditional banks and threaten their ability to issue loans. Analysts at Coinbase, however, dismiss these fears as “detached from reality.”

“The narrative that stablecoins will destroy bank lending is completely off base,” said Faryar Shirzad, Coinbase’s Chief Policy Officer. He compared the argument to past fears over innovations such as money market funds, calling it “a misunderstanding of how stablecoins are actually used.”

Stablecoins are a complement, not a threat, to the financial system

Coinbase’s report notes that most demand for stablecoins comes from outside the U.S., particularly from users in emerging markets seeking protection from inflation and currency devaluation. “For many people in developing countries, dollar stablecoins represent the only practical access to U.S. currency,” the analysis states. Stablecoins, therefore, expand the dollar’s global reach even in regions with limited access to traditional banking.

Roughly two-thirds of all stablecoin transactions occur within DeFi ecosystems or on Blockchain platforms. According to Coinbase, these networks form the “transactional infrastructure of a new financial layer” that operates alongside traditional banking. “Seeing stablecoins as a threat is a mistake,” Shirzad said. “They actually strengthen the dollar’s global role and offer the U.S. a competitive edge it should not restrict.”

Smaller banks have little to fear

Another concern raised by banks involves the potential impact of stablecoins on community banks — smaller institutions serving local customers. Coinbase argues that the target audiences barely overlap. “The typical stablecoin holder is not a typical community bank customer,” Shirzad noted, adding that banks could actually use stablecoins to improve their services and efficiency.

Even pessimistic projections of stablecoin growth appear overstated. If the total supply of stablecoins were to rise to $5 trillion over the next decade, most of those funds would likely remain abroad or locked within digital payment systems — not withdrawn from U.S. bank accounts.

In contrast, U.S. commercial banks currently hold over $18 trillion in deposits, meaning the overall impact of stablecoins on the domestic banking sector would remain “marginal,” according to Coinbase.

Regulation tightens as banks adapt

Regulatory frameworks are also evolving. This year, the GENIUS Act came into effect in the U.S., setting clear rules for operating stablecoin services. Many major banks and financial institutions have since launched or are considering their own stablecoin projects. Coinbase views this as evidence that the traditional financial sector recognizes the potential of digital dollars — and should pursue collaboration rather than confrontation.

Coinbase’s message is clear: fears of customer outflow are exaggerated. Stablecoins are not a rival but an integral part of a new financial infrastructure that could strengthen the U.S. dollar’s role and global trust in digital finance.

Sources:

https://x.com/faryarshirzad/status/1983608576737251531

https://ctf-images-01.coinbasecdn.net/o10es7wu5gm1/62jgLyqPU7rFNyrDIew3ON/74b025aa29c36033bb201de2e769ec9c/Stablecoins_and_Bank_Deposits__Overstating_Risk.pdf

https://cointelegraph.com/news/banks-stablecoin-concerns-overblown-ignores-reality-coinbase