Summary
- Coinbase Institute said the growth of stablecoins could create an opportunity to strengthen the competitiveness of US regional banks.
- The report said there is no meaningful correlation between the expansion of stablecoins and outflows from US regional bank deposits.
- Coinbase Institute said public blockchain-based stablecoin networks could make US regional banks the biggest beneficiaries in payments, cross-border remittances and tokenized securities settlement.
Forecast Trend Report by Period
The growth of the stablecoin industry may give US regional banks a chance to strengthen their competitiveness, contrary to longstanding concerns.
Coinbase Institute, the research arm of US cryptocurrency exchange Coinbase, said in a report released July 15 that there is little evidence to support fears that stablecoins will erode regional banks' deposit bases. The report was titled "Regional Banks and Stablecoins: Nothing to Fear, Much to Gain."
The institute said it found no statistically significant correlation between stablecoin growth and deposit outflows at US regional banks. During a period when Circle's USDC market capitalization increased by about $75 billion, deposits at US regional banks also rose. Coinbase has offered rewards on Circle for more than four years, yet no decline in bank deposits has been observed, the report said.
The institute also cited a 2024 study by the University of California, Los Angeles. It said 70% to 80% of US bank deposits are insensitive to interest-rate changes. Even when money-market fund yields climbed to about 5% in 2022, there was no large-scale shift in deposits.
Coinbase concluded that US regional banks could instead emerge as the biggest beneficiaries of stablecoin industry growth. In the past, global systemically important banks, or GSIBs, such as JPMorgan benefited from economies of scale because the cost of building payment systems, cross-border remittance networks and cash-management infrastructure was so high. Public blockchain-based stablecoin networks are now sharply lowering those barriers to entry, the institute said.
Regional banks could use stablecoins to offer services on a level closer to large banks, including 24-hour real-time payments, lower-cost cross-border remittances and settlement for tokenized securities, according to Coinbase. The institute also said one advantage of stablecoins is that banks do not need to build their own systems to provide those services.
"Stablecoins can strengthen, rather than replace, the role of traditional banks," Coinbase Institute said. It added that as payment and cash-management capabilities once dominated by large banks shift to shared infrastructure, regional banks stand to be the biggest beneficiaries.
