In a recent development that could reshape the narrative around digital finance, Faryar Shirzad, the chief policy officer at Coinbase, has taken a firm stance against the prevailing alarmist rhetoric from traditional banking institutions. According to Shirzad, the notion that stablecoins pose a threat to the financial system is nothing more than a myth perpetuated by banks to safeguard their own revenue streams.
Analyzing the Claims
Shirzad’s commentary, articulated in a blog post, challenges the core assertion from banks that stablecoins could trigger a mass exodus of deposits. “The central claim — that stablecoins will cause a mass outflow of bank deposits — simply doesn’t hold up,” he wrote. He further elaborated that recent studies show no substantial correlation between the adoption of stablecoins and the flight of deposits from community banks. Shirzad is confident that even larger banks, which still hold substantial reserves at the Federal Reserve, would not be adversely affected.
In his analysis, Shirzad pointed out that if deposits were genuinely at risk, banks would have already begun offering higher interest rates to attract customers, instead of letting significant amounts of cash idle at the central bank. This observation underscores his argument that banks’ warnings are more about protecting their lucrative payment processing fees than genuine concerns about financial stability.
The Real Threat: Disrupting Payment Systems
The conversation about stablecoins often revolves around their nature as digital tokens tied to real-world assets like the US dollar. Shirzad posits that the real fear banks have is not about losing deposits, but rather the potential disruption of their payment systems. The traditional financial sector currently benefits from an estimated $187 billion annually in swipe fees from card networks and banks. Stablecoins, which offer a faster and cheaper alternative for moving money, could significantly eat into this revenue.
Drawing parallels to historical resistance to technological advances such as ATMs and online banking, Shirzad suggests that the current pushback against stablecoins is part of a pattern of incumbents trying to preserve their profits by warning of systemic dangers that often don’t materialize.
Debunking the Myths
Shirzad dismissed forecasts suggesting trillions in potential outflows from bank deposits to stablecoins, noting that their total market cap is approximately $290 billion, as reported by CoinGecko. He emphasized that stablecoins serve primarily as a means for payments — facilitating the trading of digital assets or remittances — rather than functioning as long-term savings instruments. For instance, a business using stablecoins to settle transactions with an overseas supplier is not siphoning money from its savings account but opting for a more efficient transaction method.
Shirzad advocates for banks to embrace this technological evolution instead of opposing it. Stablecoin infrastructure, he argued, could enhance the existing financial system by reducing settlement times, lowering costs associated with correspondent banking, and enabling round-the-clock transactions. Institutions that choose to adapt may find themselves reaping significant benefits from this shift.
A Global Perspective on Regulation
Concerns about stablecoins are not confined to the United States. Across the Atlantic, the United Kingdom is grappling with similar issues. The Financial Times recently reported that the Bank of England is contemplating imposing caps on the amount of “systemic” stablecoins that individuals and businesses can hold. The proposed limits are as low as 10,000 pounds ($13,600) for individuals and around 10 million pounds for businesses. The intent behind these thresholds is to prevent abrupt deposit outflows that could destabilize lending and financial stability.
Officials in the UK define systemic stablecoins as those already widely used for payments or those expected to gain such traction. The concern mirrors that of the US — a fear of destabilizing the traditional banking framework. However, the regulatory considerations also highlight a recognition of stablecoins’ growing role in the global payment ecosystem.
Embracing the Future of Finance
Shirzad’s insights offer a compelling counter-narrative to the banking sector’s warnings about stablecoins. By focusing on the potential for innovation and efficiency within the financial system, he underscores a path forward that sees technology as an ally rather than an adversary. As the discourse around stablecoins continues to evolve, both in the US and internationally, it remains to be seen whether traditional financial institutions will heed the call to adapt or continue resisting the tide of change. As Shirzad suggests, those willing to embrace this transformation stand to benefit significantly in the new financial landscape.
Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
