Coinbase Aims to Modernize Direct Deposit Systems via Blockchain Stablecoin Settlements

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Fredrik Vold

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July 3, 2023 17:04 EDT

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Coinbase has said it wants to modernize its direct deposit system using blockchain-based stablecoin settlements instead of the traditional ACH deposits.

According to a blog post written by Yuga Cohler, a senior software engineer at Coinbase, the company’s goal is to update the financial system and promote the adoption of crypto worldwide, with a focus on consumer rights and security.

Coinbase said the current direct deposit system in the US, known as Automated Clearing House (ACH), suffers from inefficiencies and multiple shortcomings, including the involvement of multiple parties and complex processes.

This inevitably leads to delays and a lack of standardization, the exchange said, while adding that it believes that blockchain-based stablecoin settlements, using a USD-pegged token such as USDC, can address these issues.

Faster transactions without middlemen

First and foremost, settling transactions on the blockchain means that Coinbase can offer faster confirmation times compared to the traditional ACH system, which can take one to two business days.

Moreover, blockchain-based settlements eliminate the need for intermediaries such as Originating Depository Financial Institutions (ODFIs) and Receiving Depository Financial Institutions (RDFIs), the blog post explained.

It added that this approach allows users to have full control over their own assets.

In terms of security, Coinbase emphasized the advantages of blockchain technology, including the benefits of decentralization and cryptography, and pointed out that stablecoin settlement can offer “similar security guarantees of ACH transactions, without compromising settlement time.”

Additionally, Coinbase said that a blockchain-based direct deposit system can offer “faster confirmation times, significant cost savings, and minimized price volatility,” while eliminating middlemen.

“[…] by prioritizing consumer rights and security, we can foster a future where financial transactions are not only efficient but also empower individuals and businesses with economic freedom and opportunity on a global scale,” the blog post concluded.