Crypto Didn’t Take the Money - Coinbase Did

KlariVis, a banking analytics platform, has released a study claiming that U.S. banks are losing deposits due to money being transferred to the Coinbase exchange. According to the study, $78.3 million was moved from deposits across 53 banks to Coinbase over the past year.

Several cryptocurrency media reported this. And, at first glance, it looks like cryptocurrencies are gradually replacing the dollar. But what do these numbers actually mean?

I don’t think those dollars ever left the banking system. That $78.3 million was sitting in banks a year ago, and it’s still sitting in banks today. The only difference is whose account it’s on. Before, it belonged to retail customers. Now, it likely sits in accounts held by Coinbase. From the perspective of the banking system as a whole, not much has changed. If anything, this could even be beneficial: banks typically pay interest on retail deposits, while funds held by a company like Coinbase are more likely to sit in operational accounts, where no interest needs to be paid.

That said, the situation may be less comfortable for the specific 53 banks analyzed in the study. If Coinbase doesn’t hold accounts with them, then for those banks this does represent an outflow of funds.

And that’s really all these KlariVis numbers tell us. Crypto isn’t the key factor here. The real issue is a decline in balances at specific banks. Perhaps they should have been banking Coinbase instead of focusing on retail clients.