Stablecoins not a ‘systemic risk’: Coinbase pushes back on GENIUS Act critics
Crypto bill remains in limbo as stablecoin yield issue drags on
The debate over stablecoin yields shows no signs of ending soon. At the center of the issue are two opposing sides, the crypto industry and traditional banks, both pushing for a compromise but remaining firmly divided.
Meanwhile, Coinbase has taken a strong position. The exchange has consistently pushed back against claims that stablecoins pose a “systemic risk” to the broader U.S. financial system.
Stablecoins are way safer, says Coinbase
In a recent statement, Faryar Shirzad, Coinbase’s Chief Policy Officer, dismissed claims that stablecoins mirror money market funds (MMFs), which triggered past financial crises.
Shirzad said that it was a misconception to equate risky prime MMFs that triggered the 2008 financial crisis with safer government-backed MMFs. According to Shirzad, stablecoins follow the ‘secure’ government model and will be “future safe haven.”
“But it is just the opposite (of projected financial crisis)– stablecoins will be the future safe haven.”
Another Coinbase official, Paul Grewal, the firm’s chief legal officer (CLO), echoed the same in a recent CNBC interview.
“Stablecoin issuer deposits (reserves) are not re-lent out like the fractionalized reserve system used by banks. They’re backed dollar-for-dollar in short-term instruments, principally U.S. Treasuries. They are much safer than the banks.”
Crypto bill on the lifeline
But not all the issuers’ reserves are backed by short-term bonds. The stablecoin law, the GENIUS Act, allows for the reserves to include uninsured deposits, repurchase agreement loans, and shares of MMFs.
According to Better Markets, a financial reform nonprofit, this ‘risky’ reserve composition makes stablecoin vulnerable to bank-like runs seen in 2020 and 2008.
The same framing was applied by the Bank Policy Institute (BPI), a lobby group for banks, which called stablecoins a ‘less regulated cousin’ of money market funds.
In fact, these arguments by Better Markets and BPI were the ones Shirzad addressed. The ongoing discussion is part of the larger push for compromise on stablecoin yield that has stalled the market structure bill.
Meanwhile, reports indicate that Democrats have planned a meeting to discuss the bill. This follows White House meeting held on the 2nd of February, to broker a stablecoin yield deal between banks and the crypto industry by the end of the month.
It remains unclear whether the bill will progress out of the Senate Banking Committee by Q1 2026.
Final Thoughts
- Coinbase officials have maintained that stablecoins are much safer and carry less risk than banks.
- Senate Democrats planned a meeting on the crypto bill, but uncertainty remains on the legislation’s momentum.
