Coinbase’s CPO has defended stablecoins and pushed back on the banking sector’s fears of a potential collapse of bank deposits and community banks, arguing that the concerns are unfounded and could pose a risk to the emerging sector.
In an X post, Shirzad affirmed that the ongoing narrative that stablecoins will destroy bank lending “ignores reality” and misreads the moment, as “faster, cheaper, programmable transactions aren’t a threat—they’re overdue progress.”
The landmark crypto framework, which was signed into law in July, prohibits interest payments on the holding or use of payment-purpose stablecoins. However, the prohibition only tackles issuers and could be “easily circumvented” by exchanges or affiliates providing rewards.
In August, multiple banking associations across the US sent a joint letter to the Senate Banking Committee urging Congress to amend the law. The letter argued that interest payments distort market dynamics and could affect credit creation, and suggested extending the prohibition on interest payments to include digital asset exchanges, brokers, dealers, and related entities.
Coinbase Institute outlined multiple reasons why stablecoins won’t drain deposits from US banks and instead will strengthen the global role of the US dollar, introduce long-overdue competition in the payments sector, and support new, more efficient channels for credit formation.
The market note argued that stablecoin demand is global, with most current use coming from abroad and on-chain markets. They cited a recent Atlantic Council report showing that over 80 percent of transaction volume comes from international users seeking dollar exposure.
In that sense, they are the transactional plumbing of a new financial layer that runs parallel to, but largely outside, the domestic banking system. (…) Therefore, forecasts proposing that several trillion dollars could flow into stablecoins over the next decade should be carefully scrutinized.
Additionally, Coinbase highlighted that banks have excess liquidity and have put out trillions of dollars of deposits in reserves and treasuries, suggesting that the sector has enough credit slack to compete with stablecoins for a more efficient financial system. Therefore, it would be “inconsistent to claim that stablecoin growth poses a systemic threat.”
Lastly, Coinbase asserted that “Credit is evolving, not shrinking. Lending is shifting to private credit, fintech, and DeFi channels that don’t depend on deposits. Liquidity moves—it doesn’t vanish,” concluding that “treating this development as a threat risks misunderstanding the transformative direction of financial innovation and constraining an emerging advantage for the United States.”
