Coinbase vs. Banks: The Battle Over Stablecoin Rewards and the GENIUS Act

The article details an intense conflict between the crypto exchange Coinbase and a coalition of U.S. banking groups regarding the offering of rewards tied to stablecoin payments.

The Core Dispute: Defining “Interest”

• The Law in Question: The debate centers on the GENIUS Act, which explicitly prohibits stablecoin issuers from offering interest or yield to token holders.
• Banks’ Argument: Banking lobbyists argue that this prohibition should be extended to exchanges and affiliated businesses. They claim that offering merchant rewards, cashback, or discounts tied to stablecoin payments—especially if the third party has financial ties to the issuer—amounts to “indirect interest”. They are urging regulators to ban these incentives.
• Coinbase’s Position: Coinbase sharply criticized the banks’ proposal as “unamerican,” an overreach, and a distortion of the GENIUS Act’s intent. Policy chief Faryar Shirzad insists the law applies only to stablecoin issuers and urged regulators to rely on the law’s plain text.

Underlying Concerns and Stakes:

• Bank Fear of Disruption: Shirzad warns that the banks’ efforts are motivated by a fear that stablecoins could disrupt the traditional financial system. Banks rely heavily on customer deposits, and a U.S. Treasury estimate suggested widespread stablecoin usage could potentially pull over $6.6 trillion in deposits out of the banking sector.
• Consumer and Merchant Costs: Coinbase argues that stablecoins could significantly reduce merchant payment costs (e.g., the $180 billion in card fees paid by U.S. retailers in 2024). Banning rewards would push merchants and consumers back to traditional, high-fee card networks.
• Crypto Exchange Incentives: Crypto exchanges have a vested interest in defending stablecoin usage, as increased payment and trading activity generates revenue. Many exchanges offer crypto rewards on branded cards, a model that could be jeopardized if regulators adopt the banks’ broad interpretation.

Despite the pressure, Shirzad remains confident that regulators will stick to the statutory text of the GENIUS Act and that “common sense will prevail,” preventing an expansion of the law’s scope.

November 2025, Cryptoniteuae