Several major US banks have initiated pilot programs with Coinbase involving stablecoins, crypto custody services, and even trading, according to remarks made by CEO Brian Armstrong during his appearance at The New York Times DealBook Summit on December 3.

While Armstrong declined to identify the specific banks involved, he cautioned that banks resistant to cryptocurrency  and blockchain adoption ultimately risk being overtaken by more innovative competitors. 

“The ones who are fighting it are going to get left behind”, said Armstrong.

Financial institutions that embrace these technological changes are positioning themselves advantageously, he further suggested during the panel discussion alongside BlackRock CEO Larry Fink.

Stablecoin Market: Growth Expectations

Citigroup recently revised its projections upward, now forecasting that the stablecoin market could reach $1.9 trillion under baseline assumptions and potentially $4 trillion in an optimistic scenario by 2030. Citi. Coinbase itself projects more modest growth to $1.2 trillion by 2028.

Armstrong characterized the current state as the moment when cryptocurrency transitions from operating in gray markets to becoming part of established finance, pointing to recent legislative developments including the passage of the GENIUS Act.

BlackRock's Bitcoin Stance: A Change of Tune

Fink acknowledged his previous skepticism toward Bitcoin, noting his views changed during the COVID-19 pandemic after engaging with advocates and reconsidering the asset class. After all, BlackRock's iShares Bitcoin Trust has emerged as the dominant spot Bitcoin ETF with an AUM of around $72 billion at time of writing, according to CoinMarketCap data.

Fink admitted an appreciation for Bitcoin’s utility, though he noted the asset remains significantly affected by leveraged trading activity.

Banking Industry Tensions Persist

Despite collaboration on pilot programs, tensions persist. 

The Banking Policy Institute, an advocacy organization chaired by JPMorgan CEO Jamie Dimon, urged Congress in August to strengthen stablecoin regulations, expressing concerns that capital flows from traditional deposits into stablecoins could constrain credit availability and increase borrowing costs.

Armstrong has been forthright about Coinbase's broader ambitions, previously stating the company aims to develop into a comprehensive financial services platform offering credit cards, payments, and rewards that could serve as alternatives to traditional banking products.

Armstrong shared expectations that traditional banks would reverse their current opposition within one to two years, ultimately advocating for the ability to offer interest-bearing stablecoins as they recognize competitive pressures.

Takeaway

The newly-revealed partnership between Coinbase and major US banks represents a pragmatic but ‘hushed’ approach as traditional finance integrates blockchain technology. Both execs hinted at concerns about America's competitive position, with Fink noting that countries such as India and Brazil have advanced ahead of the United States in developing real-time payment systems and digitized currency frameworks.

Ultimately, however, the revelation seems to demonstrate two things very clearly…

• US banks are coming around to blockchain and cryptocurrency but much is still being developed away from the public eye.
• Coinbase is positioning itself effectively as the go-to infrastructure provider for said banks’ experimentation with blockchain technology.

Sources

• Bloomberg: Big Banks Partnering With Coinbase on Crypto Pilots, CEO Says
• CoinDesk: Coinbase CEO Armstrong Says Banks That Don't Adapt to Stablecoins Will Be 'Left Behind'
• Cointelegraph: Major banks running stablecoin, crypto-trading pilots with Coinbase, Armstrong says
• Citi: Stablecoins 2030
• The Defiant: Citi Projects Stablecoin Market Could Reach $4 Trillion by 2030
• Coinbase Institutional: New Framework for Stablecoin Growth
• CryptoNews: From “rat poison” to hedge: Larry Fink, Brian Armstrong and Crypto’s next act
• Chainalysis: U.S. Senate Advances GENIUS Act: Long Awaited Stablecoin Framework Edges Closer to Reality‍
• CoinMarketCap: Bitcoin ETF Data

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