- Coinbase is reportedly lobbying US lawmakers to reject any transfer to amend the crypto market construction invoice to limit its skill to pay rewards to stablecoin holders on its platform.
- Coinbase depends on income generated from curiosity on the reserves backing stablecoins like USDC as a big supply of earnings, making as a lot as US$1.3 billion from it in 2025.
- The US banking trade is searching for a ban on any yield funds to holders of stablecoins, arguing it represents a menace to the US banking system and can weaken neighborhood lending.
Cryptocurrency alternate, Coinbase, is ramping up strain on US lawmakers to reject any wording within the forthcoming crypto market construction invoice that will restrict its skill to pay rewards to customers holding stablecoins, based on a report from Bloomberg.
Citing an nameless supply with data of Coinbase’s place on the matter, Bloomberg claimed the alternate might take away its assist for the market construction invoice — generally referred to as the CLARITY Act — ought to the laws prohibit its skill to pay rewards to stablecoin holders.
As but, Coinbase has not replied to those claims.
Stablecoin rewards are an necessary money-spinner for Coinbase, notably throughout crypto bear markets. Coinbase has a small possession stake in Circle — the corporate behind the USDC stablecoin — and it shares within the curiosity earnings generated by the reserves backing USDC.
Presently, Coinbase incentivises its customers to carry USDC on its platform by providing rewards. If it had been to be banned from providing these rewards, it’s seemingly fewer clients would maintain USDC on Coinbase and its stablecoin income — estimated to have topped US$1.3 billion (AU$1.9b) in 2025 — might probably collapse.
Lawmakers are believed to be contemplating an choice that will see Coinbase and different crypto exchanges restricted from providing rewards to any regulated monetary establishment, whereas permitting common clients to proceed receiving rewards. This place is widespread among the many banking trade because it fears the expansion of yield-bearing stablecoins might see an enormous migration of capital from financial institution deposits to crypto exchanges like Coinbase.
Doubts have beforehand been raised over whether or not the invoice will probably be finalised earlier than 2027, on account of stalling associated to the US mid-term elections in late 2026, which can additionally end in a much less crypto-friendly piece of laws.
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If Coinbase had been to take away its assist for the invoice and that, in flip, amplified a collapse of bipartisan assist in Congress, the chances of the invoice passing within the first half of 2026 might drop under 70%, based on Bloomberg Intelligence Analyst Nathan Dean.
Banking Group Warns of Risks of Stablecoin Rewards
Final 12 months’s passage of the GENIUS Act offered a regulatory framework for stablecoins, mandating strict reserve necessities, month-to-month audits, anti-money laundering compliance and defining what sort of entities can problem stablecoins. Importantly although, whereas the GENIUS Act restricted stablecoin issuers from paying holders any form of yield, it allowed third-party distributors, reminiscent of Coinbase, to proceed.
This yield loophole is turning into a thorny problem, notably for banks, who worry it might see a big share of financial institution deposits circulate to platforms like Coinbase, the place clients can earn a better yield by stablecoins.
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In a letter despatched to many US Senators on January 5, the American Bankers Affiliation (ABA) hit out at yield-bearing stablecoins, suggesting they might set off a weakening of the banking sector and a decline in neighborhood lending.
The GENIUS Act, whereas not good from a neighborhood financial institution perspective, was an affordable try and deliver the stablecoin market into the regulatory gentle.
The letter mentioned that “amongst its most necessary provisions, a ban on curiosity funds was put in place to make sure this new funds market can develop and mature with out turning into a competitor to financial institution deposits.”
The ABA highlighted that stablecoin issuers are presently exploiting a “perceived loophole” within the GENIUS Act’s prohibition on curiosity funds by not directly funding rewards funds by crypto exchanges reminiscent of Coinbase.
“If billions are displaced from neighborhood financial institution lending, small companies, farmers, college students, and residential consumers in cities like ours will undergo,” the ABA argued.
“Crypto exchanges and the constellation of stablecoin-affiliated firms aren’t designed to fill the lending hole, nor will they be capable to supply FDIC-insured merchandise, some extent they omit from their aggressive promoting.”
The ABA known as on lawmakers to “get up for neighborhood banks and small companies,” by amending the forthcoming market construction invoice to make clear that “prohibition on curiosity applies to associates and companions of stablecoin issuers.” Failure to do that, based on the ABA, will “put financial progress and native communities in danger.”
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