Community banks see net deposit outflows to Coinbase: Study

New analysis from banking data company KlariVis found that 90% of community banks in its sample had customers transacting with Coinbase. Across 53 banks where transaction direction could be determined, $2.77 flowed to the crypto exchange for every $1.00 returning, resulting in a net $78.3 million deposit shift over 13 months.

The study reviewed 225,577 Coinbase-related transactions across 92 community banks and found that transfers were heavily concentrated in money market accounts, where 96.3% of identifiable transaction volume represented funds leaving banks for the exchange.

"In general, community banks can be defined as those owned by organizations with less than $10 billion in assets," the Federal Reserve says on its website.

KlariVis said that if the patterns observed in the sample hold nationally, more than 3,500 of the country’s roughly 3,950 community banks could have similar customer activity tied to Coinbase transfers.

The size of the 53 banks with directional data ranged from $185 million to $4.5 billion in deposits, with smaller institutions showing higher relative exposure. At banks with less than $1 billion in deposits, 82% to 84% of Coinbase-related transactions represented funds moving out, compared with about 66% to 67% at banks above $1 billion.

Across those banks, total outflows reached $122.4 million compared with $44.2 million in inflows. The average outbound transfer was $851, while inbound transfers averaged $2,999 but occurred far less frequently.

Source: KlariVis report

Money market accounts accounted for $36.8 million of the net outflow, with average transfers of $3,593, significantly higher than checking account movements.

Community banks hold about $4.9 trillion in deposits and fund about 60% of small business loans under $1 million and 80% of agricultural lending, according to the report, which argues sustained deposit migration could affect local credit availability.

Using academic estimates that small banks reduce lending by about $0.39 for every $1 decline in deposits, KlariVis said the $78.3 million net outflow could translate into about $30.5 million in reduced lending capacity.

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CLARITY Act stalled by debate over stablecoin yield

The study comes as the US Congress, banks and crypto-native companies debate the CLARITY Act, which aims to define the regulatory framework for digital asset markets and determine whether crypto exchanges and stablecoin intermediaries can offer yield on customer holdings.

While the GENIUS Act, passed in July 2025, bars stablecoin issuers from paying interest, it does not prohibit third-party intermediaries such as Coinbase from offering yield on stablecoin balances, which has become a major point of contention between financial institutions and crypto companies.

In August, Banking groups, led by the Bank Policy Institute, urged lawmakers to address what they describe as a “loophole” in the law, warning that allowing exchanges to offer indirect yield could accelerate deposit outflows, disrupt credit flows and shift up to $6.6 trillion from the traditional banking system.

Last month, Bank of America CEO Brian Moynihan echoed that sentiment, saying interest-bearing stablecoins could draw up to $6 trillion from the US banking system, citing US Treasury-backed research suggesting deposits could migrate if issuers are allowed to pay yield. 

Meanwhile, Coinbase CEO Brian Armstrong has pushed back against restrictions on stablecoin rewards. In January, he withdrew support for a version of the bill, writing on X: “We’d rather have no bill than a bad bill.” He raised several concerns about the draft, one of which was that it would eliminate stablecoin yield and protect banks from competition.

Source: Brian Armstrong

Despite ongoing tensions between banks and crypto companies, US Senator Bernie Moreno said on Wednesday he thinks the CLARITY Act could advance through Congress by April. Prediction marketplace Polymarket currently shows an 83% chance that the legislation will be signed into law this year.

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