Crypto exchange Coinbase is pushing back against the attempt by U.S. banking groups to have the recently enacted Genius Stablecoin Act amended.
Summary
- Coinbase has dismissed U.S. bank warnings of “deposit erosion,” citing $3.3 trillion in bank reserves and $176 billion in annual Fed interest earnings as evidence of banking system strength.
- The exchange argued that stablecoin supply is projected to reach only about $2 trillion by 2028, far below the $6 trillion deposit outflow some banks predict, and said banks fear losing $187 billion in payment-processing fees.
- US Banking groups want Congress to close a “rewards loophole” in the Genius Act that they say could let crypto platforms offer yield-like incentives and drain deposits.
Coinbase has disputed claims from U.S. banks that stablecoins are draining deposits from the traditional banking system. The company said the ongoing “deposit erosion” narrative lacks evidence, arguing that on-chain data and banking statistics show no meaningful shift of funds away from banks.
The argument came as a direct response to an August move by U.S. banking associations seeking changes to the Genius Act soon after it became law. The banks urged lawmakers to revisit sections of the legislation they believe create competitive disadvantages and potential loopholes for crypto platforms.
Coinbase pointed to data showing that U.S. banks hold about $3.3 trillion in reserves at the Federal Reserve, earning roughly $176 billion in interest last year. The exchange argued that such figures undercut claims of widespread deposit flight and show banks are not facing the liquidity crunch they suggest.
The exchange also challenged projections of a $6 trillion drain in bank deposits from stablecoin growth, noting that total stablecoin supply is expected to reach only about $2 trillion by 2028.
Coinbase added that most stablecoin use supports payments and remittances rather than pulling money out of savings accounts, and suggested banks are more concerned about losing an estimated $187 billion in annual payment-processing fees than about protecting financial stability.
Why US Banking groups are pushing back against the GENIUS Act
Banking institutions in the United States are urging Congress to tighten the GENIUS Stablecoin Act, arguing that a key “rewards loophole” gives crypto platforms an unfair advantage. The law prohibits stablecoin issuers from paying interest or yield, but banks argue that it does not clearly stop exchanges and other intermediaries from offering reward programs tied to stablecoin holdings.
The groups warn that this gap could allow crypto platforms to lure customers with yield-like incentives, divert deposits from traditional banks, and ultimately disrupt credit markets.
Associations including the American Bankers Association, Bank Policy Institute, and Consumer Bankers Association have asked lawmakers to amend the Act to close the loophole. Their proposals seek to extend the prohibition on paying “interest, yield, or rewards” to any entity offering stablecoin-related services, not just the issuers themselves.
Bank lobbyists maintain that without these changes, stablecoin platforms will continue to lure deposits away from traditional institutions while operating outside the capital and liquidity requirements that banks must meet, creating what they call an uneven competitive landscape.
Coinbase’s position echoes that of other industry groups, which maintain that the so-called loophole is not a flaw but a necessary feature to support competition and innovation. They argue that restricting exchanges from offering rewards would unfairly shield banks while limiting consumer choice in the stablecoin market.