Coinbase CEO warns against banks lending deposits without consent

Coinbase CEO Brian Armstrong wants you to think about something most people never consider: what happens to your money after you deposit it at a bank. Spoiler, the bank lends most of it out. And according to Armstrong, nobody really asked your permission. In a September 19 interview on the Money Rehab podcast, Armstrong laid out what he sees as a fundamental difference between traditional banking and stablecoin operations. Banks take your deposits and lend them to other people, keeping only a fraction on hand. Stablecoins like USDC, by contrast, are supposed to be backed dollar-for-dollar by actual reserves. The fractional-reserve problem Armstrong’s core argument is straightforward. Banks engage in fractional-reserve lending, which means they use customer deposits to issue loans, mortgages, and other credit products. That’s literally the business model, and it’s the reason banks need a license to operate. “We’re not engaging in fractional reserve lending. That’s what you need a bank license for.” When you hold USDC, the underlying reserves are parked in things like short-term US Treasuries rather than loaned out to borrowers who might not pay it back. The GENIUS Act, signed into l...