Austin Campbell says stablecoins move bank deposits, not destroy them

Banks have spent months warning that stablecoins could drain their deposit base. Austin Campbell thinks the math says otherwise.

On a recent episode of CoinDesk’s The Policy Protocol podcast, published around October 23, 2026, the founder and CEO of Zero Knowledge argued that stablecoins cannot cause net deposit flight from the banking system. His view: the money changes hands, but it never actually leaves.

The accounting argument

Campbell’s case rests on a simple observation about plumbing. Every time a stablecoin is created or redeemed, a bank deposit moves from one account to another.

Stablecoins causing deposit flight is “mathematically not possible,” Campbell said.

Stated plainly, when someone buys a stablecoin, their dollars land in somebody else’s bank account. When they redeem, the trip runs in reverse. Ownership of the deposit shifts between accounts or between banks, according to Campbell, but the total pool is not destroyed in the process.

Campbell’s point is narrower and more technical. A particular bank might lose deposits to another bank. The system as a whole, in his telling, does not.

He also pushed back on the idea that stablecoins are simply a riskier version of a bank account. Campbell described them as closer to cash or money-market instruments than to leveraged bank deposits.

That distinction is not cosmetic. Banks lend out a portion of the deposits they hold, which is what makes them banks. A stablecoin built more like a money-market product operates on a fundamentally different model, so comparing the two head to head can mislead.

Why the banks are worried

The argument lands squarely in an active lobbying fight. Banking trade groups, including the American Bankers Association (ABA) and the Independent Community Bankers of America (ICBA), have raised concerns that stablecoins offering yield could pull money away from traditional deposits.

Those groups have pushed for restrictions on stablecoins that pay holders a return. The logic is easy to follow: if a digital dollar pays interest and a checking account barely does, customers might start voting with their wallets.

Campbell called those concerns misinformed. He characterized the deposit-flight narrative as a misunderstanding of how stablecoins actually work, rather than a sober assessment of risk.

Under the Genius Act framework, stablecoin issuers can back their tokens with bank deposits, Treasury bills, repurchase agreements, or reverse repos. They are not required to replicate FDIC-insured deposits.

A busy week for digital dollars

The podcast conversation arrived alongside several notable US developments. The Office of the Comptroller of the Currency (OCC) has been finalizing rules on stablecoins, adding regulatory detail to a sector that spent years operating in gray zones.

Meanwhile, JPMorgan launched its JPMD tokenized deposit on the Ethereum blockchain.

Campbell drew a contrast between bank deposit tokens like JPMD and stablecoins. A tokenized deposit is still a bank liability, with everything that implies. A stablecoin, by his framing, is a different product with a different risk profile.

Who is making the argument

Campbell is not a casual observer here. He previously managed reserves for Paxos’ BUSD, which became the third-largest stablecoin and peaked above $20 billion.

Running reserves at that scale means seeing the mechanics of issuance and redemption up close, daily. When he talks about deposits moving between accounts, he is describing workflows he has handled directly.

He has also been a consistent critic of how the banking sector understands stablecoins. His broader thesis focuses on the efficiency gains that blockchain rails could bring to payments and settlement, rather than on stablecoins as a threat to existing institutions.

What this means

For policymakers, Campbell’s argument reframes the central question. If stablecoins only shift deposits around, then the debate is less about systemic stability and more about which banks win or lose market share.

The yield question is where this will likely get decided. If regulators accept the deposit-flight thesis, restrictions on yield-bearing stablecoins become easier to justify. If Campbell’s view gains traction, those restrictions start to look more like protectionism than prudence.

For banks themselves, the JPMD launch suggests at least some large institutions are choosing to build rather than block. Tokenized deposits let a bank keep the customer relationship while offering onchain functionality. Whether smaller community banks can follow that path is a separate and harder question, and it helps explain why groups like the ICBA are pushing so hard.

Campbell’s accounting argument will not end the debate on its own. But it does force critics to be more precise about what they fear: a vanishing deposit base, or simply deposits ending up somewhere they would rather not see them go.