Crypto exchange Coinbase has come out in defense of the Genius StableCoin Act, dismissing claims by US banking groups that stablecoins are siphoning deposits from the traditional banking system. The company argues that the narrative of “deposit erosion” lacks evidence and points to data and banking statistics that show no significant shift in bank deposits.
Coinbase’s argument is a direct response to a recent plea by US banking associations to amend the Genius Act, which they claim creates competitive disadvantages and potential loopholes for crypto platforms. The banks are calling on legislators to rethink parts of the legislation that they believe give crypto platforms an unfair advantage.
US Banking Groups’ Concerns
The US banking groups, including the American Bankers Association, the Bank Policy Institute, and the Consumer Bankers Association, are pushing for changes to the Genius Act, citing concerns over a so-called “reward gap” that they claim allows crypto platforms to offer earnings-like incentives and deposits. They warn that this gap could enable crypto platforms to lure customers away from traditional banks, ultimately disrupting credit markets.
Coinbase, however, points out that US banks hold around $3.3 trillion in reserves at the Federal Reserve and earned interest of around $176 billion last year. The exchange argues that these figures contradict claims of widespread deposit flight and that banks are not facing the liquidity crisis they propose.
Stablecoin Supply and Bank Deposits
The exchange also questions forecasts of a $6 trillion drain in bank deposits due to stablecoin growth, noting that the entire stablecoin supply is expected to reach only around $2 trillion by 2028. Coinbase adds that most stablecoin use supports payments and transfers rather than withdrawing money from savings accounts, and suggests that banks are more concerned about losing $187 billion in annual payment processing fees than about losing financial stability.
According to Coinbase, the data and banking statistics simply do not support the claim that stablecoins are causing a significant shift in bank deposits. The company argues that the Genius Act is designed to promote competition and innovation in the stablecoin market, and that restricting the ability of exchanges to offer rewards would unfairly protect banks and limit consumer choice.
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