Quick Breakdown
- Coinbase says fears about stablecoins undermining U.S. banks are exaggerated.
- Global, not domestic, demand fuels stablecoin growth, especially in emerging markets.
- Stablecoins could bolster dollar dominance rather than threaten community banks.
Coinbase refutes “stablecoins will destroy banks” narrative
Coinbase researchers have pushed back against growing concerns that stablecoins could destabilize the U.S. banking system by draining deposits and limiting lending capacity.
“The ‘stablecoins will destroy bank lending’ narrative ignores reality,”
said Coinbase’s Chief Policy Officer, Faryar Shirzad, in a post on Wednesday.
“Most stablecoin demand comes from outside the U.S., expanding dollar dominance globally, not competing with your local bank.”
The “stablecoins will destroy bank lending” narrative ignores reality. U.S. banks are sitting on trillions in reserves—they have plenty of liquidity. Meanwhile, most stablecoin demand comes from outside the U.S., expanding dollar dominance globally, not competing with your local… pic.twitter.com/3wCOEm6Zr0
— Faryar Shirzad 🛡️ (@faryarshirzad) October 29, 2025
Shirzad’s statement accompanied a Coinbase market note asserting that the debate over stablecoins mirrors earlier anxieties around financial innovations such as money market funds—concerns that ultimately proved exaggerated.
Global demand, not domestic competition
According to Coinbase, stablecoin adoption is primarily driven by international users seeking U.S. dollar exposure, particularly in emerging markets where local currencies are volatile. The tokens serve as a lifeline for individuals and businesses needing a stable store of value and a practical form of dollar access.
The firm emphasized that about two-thirds of stablecoin transfers occur within decentralized finance (DeFi) ecosystems and blockchain networks. This means stablecoins are functioning as the “transactional plumbing” of a parallel financial system rather than replacing domestic bank deposits.
Community banks unlikely to be affected
Coinbase further dismissed claims that community banks could suffer from widespread stablecoin use. Shirzad argued that the overlap between typical stablecoin users and community bank customers is “minimal at best,” suggesting that smaller banks could, in fact, enhance their services by integrating stablecoin technology.
The company also questioned forecasts predicting trillions of dollars flowing into stablecoins over the next decade. Even if global circulation reached $5 trillion, Coinbase noted, most of that value would be foreign-held or locked within digital settlement systems—not pulled from U.S. checking or savings accounts.
With over $18 trillion in U.S. commercial bank deposits, Coinbase concluded that stablecoins’ impact on domestic banking would remain marginal while significantly reinforcing the global influence of the U.S. dollar.
The comments come as several major banks and financial institutions move to launch or explore stablecoin products following the passage of the GENIUS Act earlier this year, which set out a regulatory framework for stablecoin service providers in the United States.
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