A recent analysis conducted by KlariVis reveals that 90% of the sampled community banks had customers conducting transactions with Coinbase. Over a span of 13 months, a staggering $78.3 million in net deposits shifted to the crypto platform, illustrating a 2.77 to 1 outflow to inflow ratio. This analysis accounted for 225,577 transactions across 92 banks and highlighted that most of these outflows were from money market accounts, which represented approximately 96.3% of the total identifiable transaction volume leaving banks.

The findings suggest that if the trends hold true nationally, around 3,500 of the 3,950 community banks could be facing similar customer behaviors related to Coinbase transactions.

Implications for Lending Capacity

According to the report, community banks hold roughly $4.9 trillion in deposits and fund about 60% of small business loans under $1 million. A sustained outflow of deposits could potentially hinder local credit availability. Utilizing academic estimates, KlariVis posits that the observed net outflow could result in an approximate $30.5 million decrease in lending capacity.

This situation is further compounded by legislative deliberations, including the CLARITY Act, aimed at establishing a regulatory framework for digital asset markets. Ongoing discussions among US lawmakers, banks, and crypto firms revolve around whether exchanges can provide returns on customer holdings.

Amidst these tensions, bankers have raised concerns about a potential $6.6 trillion migration from traditional banks to digital platforms if yield offerings are permitted on stablecoin balances. Coinbase’s CEO, Brian Armstrong, has openly criticized restrictions on these offerings, advocating for competitive fairness within the market.