Coinbase’s latest Institutional Insights report argues that fears over stablecoins draining U.S. bank deposits are “significantly overstated,” calling the narrative a misunderstanding of how digital dollars actually function within the global financial system.
According to the report, most demand for stablecoins doesn’t originate from U.S. households or traditional depositors but rather from DeFi platforms, fintech applications, and international markets. Coinbase suggests that stablecoins are expanding access to the dollar, not competing with it, by strengthening its global dominance in digital commerce.
Banks Have Ample Liquidity
The report highlights that U.S. banks already hold trillions of dollars in reserves and Treasuries, providing enough liquidity to absorb stablecoin growth. It notes that the financial system has “credit slack” and that competition from blockchain-based instruments like stablecoins should be viewed as modernization rather than a threat.
💡 INSIGHT: Coinbase says fears that stablecoins will drain bank deposits are exaggerated. Most demand comes from DeFi and global markets. pic.twitter.com/qQEnmx8PqL
— Cointelegraph (@Cointelegraph) October 30, 2025
“Stablecoins don’t shrink liquidity, they redirect it,” Coinbase wrote, emphasizing that credit is evolving toward private credit, fintech, and decentralized finance channels that operate independently of traditional deposit-based lending.
Global Use, Not Domestic Drain
Coinbase’s data shows that the majority of stablecoin transactions are international, driven by businesses and investors seeking faster and more cost-efficient settlement in U.S. dollar terms. This trend, the report argues, enhances the dollar’s reach by reinforcing its use as the preferred medium of exchange in cross-border and onchain payments.
The company also underscored that community banks remain largely unaffected by stablecoin activity. Local institutions rely on client relationships and traditional lending, while stablecoin users typically engage in high-velocity, digital financial ecosystems that don’t overlap with local banking demographics.
Stablecoins as an American Advantage
Coinbase concludes that stablecoin adoption represents a strategic opportunity for the U.S., not a systemic risk. By embracing blockchain-based payment innovation, policymakers can bolster the dollar’s influence globally while fostering new channels for credit creation and capital flow.
“Treating this as a threat risks misunderstanding the direction of financial innovation,” the report states, urging regulators to recognize stablecoins as a competitive advantage for U.S. economic leadership rather than an obstacle to it.