As Congress prepares to move forward with sweeping crypto legislation, Coinbase is pressuring lawmakers to preserve its ability to pay users who hold stablecoins.
The Senate is expected to expand the U.S. Cryptocurrency Market Structure Act this week, but language targeting high-yielding stablecoin accounts has emerged as a sticking point.
The company could withdraw its support if the bill goes beyond disclosure requirements and restricts nonbank companies like Nasdaq-listed cryptocurrency exchange Coinbase from offering compensation, Bloomberg reported, citing people familiar with the matter.
At the heart of the battle is Coinbase’s yield program for users who own it. USDCis a dollar-backed stablecoin issued by Circle on its platform. The exchange will share the interest generated from: USDC We offer users 3.5% rewards through their reservations and Coinbase One subscription.
The revenue, which reached $355 million in the third quarter of this year, helps the company during market drawdowns when trading volumes decline.
A proposal supported by some banks would limit stablecoin yield programs to regulated financial institutions. Banks argue that such fees could harm “small businesses, farmers, students, and homebuyers” by taking deposits out of the traditional financial system and displacing funds from community bank loans.
Cryptocurrency companies, including Coinbase, counter that such rules would stifle competition and undermine the model already regulated under the GENIUS Act, passed in July.
Faryal Shirzad, Coinbase’s chief policy officer, said on social media that banks deposit about $3 trillion with the Federal Reserve and earn about $360 billion annually from card transaction fees. Stablecoin rewards “bring real competition to payments,” which threatens these revenues, he said.
Shirzad cited a Cornell University study on stablecoins and banking, saying, “An independent study from Cornell University confirms this: The adoption of stablecoins does not reduce bank lending.” “In fact, rewards need to be closer to 6% to have a meaningful impact on deposits. No one offers anything close to that.”
The bill has support from the Trump administration, but bipartisan support is beginning to waver due to disagreements over stablecoin rewards. At Polymarket, traders give the bill a 68% chance of becoming law by the end of the year, while at Karshi the probability is 70%.
Some lawmakers are considering a compromise that would allow only companies with banking licenses to offer rewards. Five crypto companies, including Circle, Ripple, and BitGo, received conditional approval to become federally chartered trust banks last December. However, the problem may still persist. Companies are likely to find other ways to reward users for holding their funds.
