Coinbase Institute

Our new paper, Small Banks and Stablecoins: Nothing to Fear, Much to Gain, explains why well-regulated stablecoins are a once-in-a-generation opportunity for roughly 4,000 community and regional banks to compete on equal footing in payments and programmable financial services with the big banks—often by plugging into shared infrastructure via partners, rather than building from scratch. No billion dollar tech budget needed. As for concerns about stablecoins draining community-bank deposits, the data tell a clear story. As USDC’s market cap grew to around $75 billion, overall bank and community-bank deposits grew alongside it. Over the last 6 months, USDC grew 4.6 percent while total demand deposits grew 4.5 percent. This doesn’t look like substitution. Read the paper here: https://lnkd.in/g5DZ2Ha4

Response to BPI Blog Post A recent Bank Policy Institute blog post titled "Yield-Bearing Stablecoins Can Destroy Deposits" characterizes findings in my white paper "Stablecoins and Banking: Deposit Dynamics, Financial Stability, and Regulatory Design" (https://lnkd.in/g2-JFEXq) in ways that warrant correction. Here are a few quick points before I direct readers to the full response. First, the “$3.7 trillion destroyed deposits” figure is not in my paper. BPI constructs it by subtracting a third-party adoption projection from a $300 billion competitive deposit gain — arithmetic that appears nowhere in my analysis. Logically, it is similar to arguing that, because Canada is expected to add three million jobs, the United States must therefore lose three million jobs. Second, the article treats a simplifying model assumption (that deposits and stablecoins are substitutes) as if it were a finding. The Chiu et al. (2023) framework I draw on is an equilibrium model in which deposit rates and quantities adjust jointly — not a fixed-flow exercise in which every dollar of stablecoins deletes a dollar of deposits. Third, the contractionary outcome BPI emphasizes requires stablecoin yields materially above the return on reserve assets — yields the GENIUS Act prohibits and that no issuer can sustainably pay. Under current parameters and within the law, the model predicted equilibrium lies in the expansion region, where competition disciplines deposit pricing and expands intermediation. Fourth, “9,000 banks means no market power” is not how I view deposit markets. Switching costs, search effort, cross-sell bundling, and deposit-rate stickiness generate frictions to preclude full competition even with thousands of competitors — which is precisely why retail deposit rates pass through partially and slowly. These points are discussed in more detail, together with a disclosure note, are available on my website www.linwilliamcong.com #Stablecoins #GENIUSAct #Banking #FinancialRegulation

Let's help the gig workers. Around the world, a growing share of work takes place outside traditional payroll systems, with tens of millions of app-based workers and freelancers juggling multiple platforms and clients—but facing delayed payments, fragmented earnings histories, and limited access to credit and other financial services. A new Coinbase Institute explainer details how blockchain-based payment and recordkeeping rails—especially dollar-denominated stablecoins and portable records—can provide near-instant access to income, cheaper cross-border payments, and verifiable proof of earnings that travels with workers across jobs. For policymakers, the paper highlights a clear agenda: build legal frameworks for regulated stablecoins, set standards for interoperable and portable earnings data, and establish strong guardrails around privacy, consent, and alternative credit models so these new rails expand financial inclusion and stability for independent workers rather than deepen existing vulnerabilities. Read the explainer: https://lnkd.in/evCav6Ez 

Our new Coinbase Institute paper urges the EU to adopt a robust strategy for euro-denominated stablecoins as a tool to enhance monetary sovereignty, improve cross-border payments, and support the growth of onchain financial markets. Euro stablecoins can provide a strong alternative to dollar assets in cross-border activity and, even if they reach a projected €570 billion by 2030—around 2.2 percent of euro area bank deposits—this growth is not expected to reduce bank lending, but instead strengthen the euro’s global role. They are foundational settlement assets for tokenized markets that are projected to reach trillions in value, and they should complement a wholesale digital euro by enabling interoperable cross-border payments and tokenized asset settlement where central bank instruments often cannot. The paper also explains why public, permissionless blockchains are better suited than centralized “unified ledger” designs for resilience and interoperability, and calls for targeted MiCA revisions—allowing a broader set of high-quality liquid assets in reserves, access to central bank liquidity, and competitive rewards—so that euro stablecoins are both safe and usable. Finally, we emphasize that global interoperability and mutual recognition across jurisdictions are essential if stablecoins are to deliver their full benefits for Europe’s financial system and its monetary sovereignty.  https://lnkd.in/gcQzu8fF Roeland Van der Stappen Felix Haynes

The U.S. tax code was built for 20th century money, not for an onchain financial system. Because digital assets are treated as property, every stablecoin payment, small DeFi interaction, or gas fee can technically create a taxable event—often for little to no potential gain. Crypto’s transferability across wallets and platforms makes cost basis tracking even harder, which means many taxpayers either overpay or are left navigating issues their broker cannot fully resolve. So far this year, Coinbase has seen a 34 percent increase in customer service inquiries related to tax reporting compared with the same period last year, highlighting the real-world impact of these outdated rules. Coinbase Institute has published the first paper in a new series making the case for modern crypto tax reform—starting with information reporting, payment stablecoins, and de minimis relief across digital assets. The paper outlines how reasonable de minimis thresholds (similar to those Congress has already restored for Form 1099-K), targeted reporting refinements, and cash-equivalent-style treatment for regulated payment stablecoins can reduce low-value paperwork while preserving meaningful insight for the IRS. The GENIUS Act moved stablecoin regulation forward; now tax policy needs to catch up so the United States can keep capital, jobs, and innovation onshore instead of penalizing people for using technology that Congress has already endorsed. Read it here: https://lnkd.in/gHQ7Et2t

Today's internet is still constrained by payment costs that make small transactions uneconomical. Fixed fees and legacy billing models make it impractical to charge—or pay—fractions of a cent, so we default to subscriptions, ads, and bundled access, and many potentially valuable micro-transactions never occur. To close off x402 week, our latest Coinbase Institute explainer on Micro-Access and Micropayments explores how stablecoin-based rails and the long-dormant HTTP “402 Payment Required” status code can change this, enabling users and software agents to pay and be paid tiny amounts for precisely the information, service, or task involved. By embedding low-cost, programmable payments directly into web interactions, this infrastructure can support pay-per-use access to AI and compute, microwork and digital task markets, niche data services, and pay-per-article content models—broadening participation in the digital economy, especially for students, independent developers, gig workers, and people without access to traditional banking.  https://lnkd.in/g3MDq-UF As discussed by our original explainer on Crypto and Agentic Commerce, x402 repurposes the HTTP 402 code to let browsers, AI agents, and other clients negotiate payments directly with services via structured “Payment Required” messages, turning a human checkout flow into a seamless machine-to-machine handshake. It supports immediate or deferred settlement across both traditional rails and blockchain networks, with stablecoins as a native option for global, low-friction access.  These building blocks illustrate how onchain infrastructure can embed value exchange into the fabric of the web itself and enable agent-driven commerce at internet scale. For policymakers, the key question is how to adapt rules—especially for low-value and machine-executed transactions—so that open standards like x402 and stablecoin-based micropayments can develop safely, with proportional compliance and strong consumer protections, in support of a more inclusive and resilient global payment ecosystem. https://lnkd.in/gqSDcAiM

Let's talk about the unbrokered - the 4 billion adults who don't participate in capital markets and are therefore excluded from a key source of wealth building. Christian Catalini is out with a nice Forbes piece on how technology and policy can help address that. (And he uses a chart from CBI's January paper that highlights the growing wealth creation gap.) The closing says it all: "The real test of the next financial system is not whether Wall Street can tokenize another product for institutions. It is whether a person with $50 in weekly savings can buy, hold, and sell a tiny slice of productive capital as easily as sending a message. Finance's last frontier is not payments. It is participation." https://lnkd.in/ga-XR7PT

Settlement finality—the legal moment when a transfer becomes unconditional and irrevocable—is central to financial stability, and blockchains change how we deliver it. Our new Coinbase Institute piece, Settlement Finality Onchain, shows how atomic settlement removes the T+N exposure window, how technical finality on major proof-of-stake networks creates stronger economic guarantees than centralized ledgers, and how always-on public blockchains reduce operational and liquidity risks tied to business-hour settlement and single points of failure. The remaining task is a familiar one for policymakers: define when technically final onchain transactions become legally final, and calibrate collateral, liquidity, and insolvency rules to reflect shorter, safer exposure windows. https://lnkd.in/ebsGitDA

Stablecoin Utility Report A recently released Stablecoin Utility Report maps how people actually use stablecoins today—how they earn, hold, and spend them across 15 countries. Commissioned by BVNK and produced in partnership with YouGov, Coinbase, and Artemis, the study surveyed 4,658 adults who hold or plan to hold crypto, combining behavioral data with onchain analytics.  https://bvnk.com/utility A few findings stand out: - Stablecoin holdings are rising fast. Half of holders increased their balances in the last 12 months, 56 percent plan to buy more, and 13 percent of non‑owners intend to start.  - Stablecoins are now core income and savings. Current and prospective users allocate about one‑third of their savings to crypto and stablecoins, and freelancers and marketplace sellers who get paid in stablecoins receive roughly 35 percent of annual earnings this way, with three in four saying it improves their ability to do business internationally.  - Payments are driven by practicality, not ideology. Users cite lower fees, security, and global access as top reasons to pay with stablecoins, and those receiving cross‑border payments report average fee savings of about 40 percent versus traditional rails. [One chart worth highlighting is Figure 3.3: “Where people currently spend crypto vs. where they would like to.” It shows large gaps in every category—especially major purchases and everyday subscriptions—underscoring a central message of the report: the infrastructure now exists, but merchant acceptance and integration lag far behind user demand.]

Bridging the Capital Divide This short WSJ article discusses the increasing divide between capital income and labor income. https://lnkd.in/g454xcAq Our recent research paper highlights the global capital chasm and how tokenization and good policy choices can increase participation in a critical engine of wealth creation. Tokenized securities become globally accessible, fractionally owned, and dramatically cheaper to trade and settle. No permission required. Have a look: https://lnkd.in/gyirkjhC