Concerns Over GENIUS Act Interpretation
Coinbase is escalating its public campaign against what it calls an "overreach" by banking trade groups seeking to classify a wide range of stablecoin-related merchant rewards as prohibited interest under the GENIUS Act.
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The company argues that bank lobbyists are pressuring regulators to expand the law far beyond what Congress intended, threatening innovations that could reduce retail payment costs across the U.S. economy.
Illustrating the Stakes: Merchant Rewards vs. Interest
To illustrate the stakes, Coinbase highlights a scenario involving everyday stablecoin payments: a shopper using digital tokens at a major retailer receives discounts and cashback funded entirely by the merchant.
These incentives, Coinbase says, are no different from routine commercial promotions offered through loyalty programs or card-based rewards. But under proposals advanced by banking associations, such discounts could be treated as illegal "indirect interest" if the merchant has any business relationship with a stablecoin issuer.
The GENIUS Act and its Scope
The GENIUS Act, enacted in July 2025, bars issuers of payment stablecoins from paying interest or yield "solely in connection with the holding, use, or retention" of the token. Coinbase stresses that the statute does not reference indirect interest, affiliates, or third-party benefits.
Regulators, the company argues, have authority over issuers, not over merchants, employers, or property owners who choose to use stablecoins for payments, payroll, or deposits.
Potential Compliance Risks and Economic Impact
Coinbase warns that adopting the banking industry’s expansive interpretation could create sweeping compliance risks.
Merchant discounts for stablecoin payments, routine integrations such as using an issuer’s API, or even interest paid by landlords on security deposits could all be deemed prohibited. Such an outcome, the company says, would deter stablecoin adoption and preserve high card-processing fees that cost U.S. merchants more than $180 billion in 2024.
Coinbase's Position and Call to Action
Bank groups contend they are safeguarding the intent of Congress by preventing stablecoins from becoming de facto interest-bearing instruments. But Coinbase argues the lobbying push is aimed at protecting incumbent payment revenue.
The company is urging regulators to adhere strictly to the statute’s text: prohibiting interest paid by issuers, while allowing third-party rewards that operate independently of the issuer’s activities.