<\/p>\n
Coinbase Global is escalating pressure on US lawmakers to preserve its ability to offer rewards to customers who hold stablecoins \u2014 an offering the company sees at risk if certain restrictions under discussion make it into a major crypto bill set to be unveiled Monday.<\/p>\n
The largest US crypto exchange may reconsider its support for the digital-asset market-structure bill \u2014 scheduled for markup in at least one Senate committee on Thursday \u2014 if the text includes anything beyond enhanced disclosure requirements tied to rewards, according to a person familiar with the firm\u2019s thinking.<\/p>\n
A Coinbase representative directed Bloomberg News to comments that Brian Armstrong, the company\u2019s co-founder and CEO, made in a post on X in December. He predicted that banks \u2014 which have broadly opposed stablecoin yield \u2014 would in a few years come to lobby for it.<\/p>\n
One option under consideration, according to industry insiders, would restrict the ability to offer rewards to regulated financial institutions \u2014 a move backed by some in the banking industry who argue that yield-bearing stablecoin accounts could siphon deposits away from traditional banks. Coinbase has applied for a national trust charter, which could eventually allow it to offer such rewards under those rules. But crypto-native firms are pushing to preserve platform-based rewards as a viable model even without a charter, warning that broader restrictions could upend competition in the sector.<\/p>\n
The threat to withdraw support packs a punch. The cryptocurrency industry was the largest corporate spender during the 2023-2024 election cycle, funneling huge sums of money toward favored candidates. Coinbase donated $1 million to Donald Trump\u2019s presidential inauguration and is among the companies contributing donations to finance the president\u2019s proposed ballroom for the White House.<\/p>\n
For Coinbase, the rewards are an important issue. The exchange and Circle Internet Group Inc. share some interest income generated from the reserves backing Circle\u2019s USDC stablecoin. USDC parked at Coinbase provides a steady revenue stream that\u2019s key, especially during bear markets. Coinbase also owns a small stake in Circle, currently the largest stablecoin issuer in compliance with a US law passed in July.<\/p>\n
Coinbase encourages users to hold USDC on its exchange by offering 3.5% rewards on their Coinbase One balances, for example. If the market-structure bill bans that incentive, fewer people may hold stablecoins on the exchange, and Coinbase\u2019s total stablecoin revenue \u2013 projected to have reached $1.3 billion in 2025, according to Bloomberg data \u2013 could potentially decline.<\/p>\n
ADVERTISEMENT<\/p>\n
CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n
Of course, the devil is in the details, and the impact isn\u2019t entirely clear, and will depend on the bill\u2019s exact wording. What\u2019s become clear, though, is that some language on rewards will be added to the bill, according to people familiar with the discussions.<\/p>\n
Trump\u2019s second administration quickly delivered wins for the digital asset industry, including the first federal regulatory framework for stablecoin issuers, the so-called GENIUS Act in July. The bill\u2019s signing unleashed a wave of announcements spanning from retailers to traditional financial institutions interested in entering the stablecoin sector. The Trump family itself has gotten in on the action even before it became law, when World Liberty Financial its members co-founded released its own stablecoin, called USD1.<\/p>\n
While the administration supports legislation passing swiftly, the stablecoin rewards question has eroded the bipartisan support for the market-structure bill. Coinbase\u2019s warning that it may consider pulling support is a sign of rising tensions that could contribute to delays in the bill\u2019s passage \u2014 which could mean the legislation won\u2019t get done this year at all. Markup\u2019s lacking of bipartisan support may push the odds of something passing in the first half of the year to less than 70%, according to Bloomberg Intelligence analyst Nathan Dean.<\/p>\n
The GENIUS Act prohibits stablecoin issuers from paying any form of interest or yield solely in connection with the holding of the tokens, but it does not prevent third-party distribution partners like Coinbase from offering rewards tied to their customers\u2019 balances.<\/p>\n
The banking industry has decried the idea of exchanges paying stablecoin rewards, arguing that they threaten to drain deposits from the banking system and weaken community lending.<\/p>\n
\u201cIf billions are displaced from community bank lending, small businesses, farmers, students, and home buyers in towns like ours will suffer,\u201d the American Bankers Association wrote in a recent letter. \u201cCrypto exchanges and the constellation of stablecoin-affiliated companies are not designed to fill the lending gap, not will they be able to offer FDIC-insured products, a point they omit from their aggressive advertising.\u201d<\/p>\n
The crypto industry, by contrast, paints the banking sector effort as a move to undo what was already settled in the GENIUS Act. Faryar Shirzad, chief policy officer at Coinbase, added in a recent X post that preserving rewards schemes tied to stablecoin is important for maintaining the dollar\u2019s supremacy, noting that China recently announced plans to start paying interest on its digital yuan, a central bank digital currency.<\/p>\n
ADVERTISEMENT:<\/p>\n
CONTINUE READING BELOW<\/p>\n<\/div>\n<\/div>\n