- •GENIUS Act supports 1:1 stablecoin backing and audits but does not prohibit user rewards, fueling ongoing regulatory debate.
- •Coinbase argues that limiting stablecoin incentives will stifle competition, hinder innovation, and reduce consumer payment options nationwide.
U.S. banks have increased pressure on Congress to restrict rewards paid to users for holding stablecoins, setting the stage for a contentious debate in Washington. The backdrop is the recently enacted GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins), which provides the country’s first comprehensive regulatory framework for stablecoins. The law requires stablecoins to be backed 1:1 by liquid reserves and imposes periodic audits for issuers, but does not explicitly ban rewards on stablecoin holdings.
Coinbase’s chief legal officer, Paul Grewal, criticized the banking sector, arguing that large banks are lobbying to reverse the GENIUS Act’s support for stablecoin rewards. Grewal contends that traditional financial institutions do not wish to compete directly with stablecoin products. Instead, they seek protection from market shifts that could move as much as $6.6 trillion in deposits from banks to crypto platforms, potentially reducing credit availability for the broader economy.
Supporters of stablecoin rewards maintain that such incentives do not function as traditional bank interest and that restricting them could stifle payment innovation. Cody Carbone, CEO of the Digital Chamber, points out that rewards depend on platform usage and are not guaranteed returns, distancing them from conventional deposit interest.
The debate has drawn attention from other industry leaders. Brian Armstrong, Coinbase CEO, claims banks are motivated by frustration over lost market share, while COO Emilie Choi urges banks to improve their products rather than lobbying against crypto firms. Industry advocates have launched Stand with Crypto, a campaign encouraging users to contact lawmakers and defend their right to receive stablecoin rewards.
The outcome of this dispute may influence the future of stablecoin adoption and shape the competitive landscape between banks and crypto companies as the sector matures.