Coinbase Defends Stablecoins as Banks Push for Stricter Rules

Coinbase, one of the largest cryptocurrency exchanges in the United States, is pushing back hard against claims that stablecoins are a threat to the traditional banking system. 

In a detailed blog post released on Tuesday, the company argued that stablecoins are being misunderstood and unfairly targeted by the banking industry.

The main concern from banks is what they call “deposit erosion.” This is the idea that people will pull their money out of traditional banks and put it into stablecoins instead. 

The U.S. Treasury Borrowing Advisory Committee recently warned that this shift could lead to as much as $6 trillion in deposits leaving the banking system by 2028.

Coinbase says that number doesn’t make sense. According to the exchange, the size of the stablecoin market is only expected to reach $2 trillion by then, far below the $6 trillion figure used in the Treasury’s warning. In its blog post, Coinbase called the warning misleading and said it creates unnecessary fear.

Instead of seeing stablecoins as a threat, Coinbase described them as useful financial tools. The company said stablecoins are mainly used to make payments, especially for cross-border transactions. 

For example, if a business in the U.S. pays a supplier in another country using stablecoins, that payment is not the same as taking money out of a savings account. It’s just a faster and cheaper way to send money internationally.

Coinbase also pointed out that most stablecoin activity doesn’t happen inside the United States. Citing data from the International Monetary Fund (IMF), the company said more than half of all stablecoin transactions last year took place in emerging markets like Asia, Latin America, and Africa. 

Since many stablecoins are tied to the U.S. dollar, this helps to spread the dollar’s reach around the world, not weaken it. The company added that banks and crypto firms can actually grow together. 

Coinbase gave the example of how stock prices for both banks and crypto companies like Circle and Coinbase rose together after the GENIUS Act was passed earlier this year. This law created the first federal rules for stablecoins. 

Coinbase believes this shows that traditional finance and crypto can both succeed without one harming the other.

Critics Say Banks Want to Avoid Competition

Coinbase is not the only one speaking out. Other voices in the crypto industry are also pushing back against the banking sector’s complaints. Matt Hougan, Chief Investment Officer at Bitwise, said banks are more concerned about losing customers than helping them. 

He said banks have been offering low interest rates on savings for years and are now worried because stablecoins offer better returns. According to Hougan, “banks should stop lobbying against competition and start giving people better rates.”

Many banks, however, are asking Congress to close what they see as loopholes in the GENIUS Act. These loopholes, they argue, could allow stablecoin platforms to offer interest through third parties like exchanges. Groups such as the American Bankers Association and the Bank Policy Institute are leading the effort. 

They say that if people move their money into stablecoins that offer interest, banks could lose a lot of deposits. That would leave less money for banks to lend, making loans more expensive and harder to get.

Some banking experts are even comparing today’s stablecoin growth to what happened in the 1980s with money market funds. Back then, those funds grew from $4 billion to $235 billion in just seven years, taking a lot of deposits away from banks. Citigroup analysts said a similar situation could happen with stablecoins.

However, Coinbase says banks are already sitting on $3.3 trillion in reserves at the Federal Reserve. These funds earn about $176 billion in risk-free income every year. Coinbase argued that banks aren’t short on money, they’re just not lending it out as much. 

So the idea that stablecoins are starving banks of capital isn’t supported by the facts, the exchange said. Even though some banks are speaking out against stablecoins, others are exploring how to use them. 

Citigroup CEO, Jane Fraser, recently said the bank is looking into creating its own stablecoin and using blockchain to help clients settle payments at any time. 

JPMorgan has also released a digital deposit token for large-scale blockchain payments, and it was the lead underwriter for Circle’s initial public offering (IPO), which has since seen strong growth.

These examples show that not all banks see stablecoins as a threat. In fact, some are looking for ways to control or benefit from them. 

The Bank of England recently proposed limits on how many stablecoins people and businesses can hold, but critics say such caps would hurt innovation and give the U.S. and the European Union an edge in digital finance.

Coinbase’s XRP Holdings Drop Sharply Amid Changing Trends

While Coinbase is defending stablecoins, another major shift is happening within the exchange. Its holdings of Ripple’s XRP token have dropped significantly over the past few months. 

According to on-chain data from XRPWallet and XRPScan, Coinbase held nearly 970 million XRP tokens across 52 cold storage wallets at the start of summer 2025. By mid-September, that number had dropped to just over 100 million tokens, spread across only six wallets.

On September 13, Coinbase’s XRP reserves fell below 100 million for a short time before slightly rising the next day. As of now, the exchange holds 100.553 million XRP across six wallets. Each wallet holds around 16.5 million tokens. That’s a 90% drop from June’s total and marks a big change in Coinbase’s role as a custodian of XRP.

One reason for this shift is that XRP trading is more popular on other platforms like Binance and Bybit. Coinbase doesn’t offer as many trading options for XRP, and newer exchanges like Hyperliquid have also taken a larger share of XRP trading volume.

Some of Coinbase’s large customers, including institutions, are believed to be moving their XRP holdings to decentralized finance (DeFi) platforms and self-custody wallets. This means they prefer to manage their XRP outside of centralized exchanges like Coinbase. 

A recent transfer of 16.5 million XRP, worth about $51.4 million, back into a Coinbase wallet has led to speculation about private deals and possible institutional interest in XRP.

The drop in Coinbase’s XRP holdings comes at a time when Ripple is gaining momentum. The company recently settled a long-running legal case with the U.S. Securities and Exchange Commission (SEC) for $50 million. The case had lasted six years. 

Many experts believe there is now a strong chance that an XRP-based exchange-traded fund (ETF) could be approved soon. Some estimate the odds of such an ETF launching this year at around 90%.

Even though Coinbase’s role in holding XRP has shrunk, XRP itself remains one of the top cryptocurrencies in the world. It currently ranks third by market cap, behind only Bitcoin and Ethereum, with a market value of around $181 billion.

However, the shift raises questions about how institutions are managing their XRP. Are they storing it elsewhere? Are they preparing for a future ETF? Or are they simply diversifying their holdings? Right now, the answers aren’t clear, but the movement suggests that change is underway.

Coinbase’s stance is clear: stablecoins are not hurting the banking system. Instead, they are offering better ways to move money and spreading the U.S. dollar’s influence around the world. The company argues that banks should stop fighting innovation and start improving their services.

At the same time, the dramatic drop in Coinbase’s XRP holdings shows that the crypto market is changing fast. More institutions are looking for flexible, secure ways to manage their digital assets, whether that means using DeFi tools or preparing for new financial products like ETFs.

The battle between banks and crypto firms over stablecoin regulation is far from over. But one thing is certain: stablecoins, and the digital economy around them, are not going away. As adoption grows and more companies get involved, the rules will need to evolve to match the pace of innovation.