Major Banks Engage in Stablecoin and Crypto-Trading Tests with Coinbase, Says Armstrong

Major banks in the United States are initiating pilot programs involving stablecoins and cryptocurrency trading in collaboration with Coinbase, according to CEO Brian Armstrong. During The New York Times DealBook Summit, he expressed that banks need to embrace crypto technology or risk falling behind.

Key Takeaways

Major US banks are working on stablecoin and crypto-trading pilots with Coinbase.
CEO Brian Armstrong warns that banks slow to adopt cryptocurrencies could be at a disadvantage.
BlackRock’s iShares Bitcoin Trust has become the largest Bitcoin ETF, indicating growing institutional interest.
Traditional banks have expressed concerns regarding the impact of stablecoins on their credit system and are pushing for regulatory changes regarding digital assets.
Coinbase is positioning itself as a “super app” to compete directly with traditional banking services.

Major Banks Engage in Stablecoin and Crypto-Trading Tests with Coinbase, Says Armstrong

Banks and Coinbase's Partnership

Brian Armstrong, CEO of Coinbase, announced at the recent DealBook Summit that several leading banks in the United States are experimenting with projects centered around stablecoins, crypto custody, and digital asset trading. According to statements reported by Bloomberg, Armstrong refrained from specifying which banks are involved but emphasized that institutions that resist embracing cryptocurrency will likely find themselves at a disadvantage.

During a panel discussion alongside BlackRock CEO Larry Fink, who has previously held differing views on cryptocurrency, Armstrong shared similar positive sentiments about Bitcoin. He dismissed concerns over the possibility of Bitcoin dropping to zero, while Fink acknowledged a strong “use case” for Bitcoin, warning that it remains vulnerable to market players with leverage.

The iShares Bitcoin Trust (IBIT) from BlackRock, which launched in January 2024, has quickly become the largest Bitcoin exchange-traded fund (ETF), boasting over $72 billion in market capitalization, according to CoinMarketCap. Furthermore, BlackRock manages the most significant tokenized US Treasury product, with approximately $2.3 billion in assets under management, as reported by RWA.xyz.

Top Tokenized Treasury funds. Source: RWA.xyz

Conflict Between Traditional Banks and Coinbase

While Armstrong highlights collaborative efforts between Coinbase and major banks, tension has escalated in recent months. In August, the Banking Policy Institute, led by JPMorgan’s Jamie Dimon, warned lawmakers that stablecoins may threaten the traditional banking credit model. They recommended tightening regulations under the GENIUS Act, suggesting that a shift of capital from fiat deposits to stablecoins could lead to increased lending costs and reduced credit availability for businesses.

Moreover, traditional financial institutions are apprehensive about a perceived loophole in the US GENIUS Act, which prohibits stablecoin issuers from providing yield but allows third-party entities such as Coinbase to do so.

In September, Armstrong articulated Coinbase’s ambition to transform into a “super app” that could replace traditional banking services by offering a range of products, including credit cards, payments, and rewards. He criticized the current banking system for its outdated practices, particularly noting the high fees associated with credit card transactions.

In response to direct pushback from banks, the Independent Community Bankers of America sought to block Coinbase's application for a national trust charter in November, raising concerns about the reliability of its crypto-custody services. Coinbase's chief legal officer, Paul Grewal, has publicly addressed these challenges on social media.

Source: Paul Grewal

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