Coinbase Challenges Bank Claims on Stablecoin Incentives
- Coinbase rejects bank claims that stablecoin rewards act as indirect interest under the GENIUS Act.
- Banking groups warn stablecoin rewards may speed adoption and threaten deposit funding.
- Coinbase argues stablecoins could cut fees while banks try to protect existing payment models.
A tense dispute has emerged between Coinbase and major U.S. banking groups. The clash centers on stablecoin payments and the future of rewards tied to digital dollars. It also reflects a deeper fight over control of the next generation of payment systems. The tone sharpened this week as both sides pushed their arguments in public.
Coinbase Challenges Bank Claims
Coinbase criticized the banking groups after they urged regulators to ban rewards linked to stablecoin payments. The groups want regulators to treat merchant incentives as “indirect interest.” They argue such rewards violate the GENIUS Act. Coinbase disagrees and says the groups are stretching the law.
The GENIUS Act bars stablecoin issuers from offering interest to token holders. It does not mention crypto exchanges or merchant partners. Coinbase says the law is clear on that point. The exchange also says that banking groups want regulators to broaden the rule beyond its current limits.
Coinbase chief policy officer Faryar Shirzad shared the company’s objections on X. He said the banking groups want to control how customers use their own money. Shirzad also said their attempt has no legal support. He urged regulators to follow the text of the law passed by Congress.
Shirzad said a broad ban would create unpredictable consequences. He warned that many everyday business practices could fall under that logic. Also, he said the argument could restrict third-party services across the payments industry, calling the idea “unamerican” in his post.
Banks Warn of Threat to Traditional Deposits
Banking groups see a different risk. They worry stablecoin payments could weaken the banking system. Their fear links to stablecoin adoption at scale. They warn that interest-bearing stablecoins could draw deposits away from banks.
A U.S. Treasury estimate from April supports that concern. It showed stablecoins could trigger more than $6.6 trillion in deposit outflows. Banks rely heavily on deposits to support lending. A shift of that size would impact their funding model.
The groups argue that rewards tied to stablecoin spending could encourage faster adoption. They also say financial links between exchanges and stablecoin issuers raise concerns. This is why they frame the rewards as “indirect interest.” They want regulators to step in before such incentives spread.
Coinbase rejects the claim. The exchange says the argument targets innovation rather than risk. It also says the groups want to block new payment systems that reduce fees. Coinbase cited the more than $180 billion in card fees merchants paid in 2024. The exchange says stablecoins could reduce those costs.
Coinbase also notes its own commercial interest. More stablecoin activity brings more transactions on its exchange. Many exchanges also issue cards with cashback or crypto rewards. Those programs depend on regulators rejecting the banks’ argument. Shirzad says he remains hopeful that regulators will stick to the law.
Related: Coinbase Urges Treasury to Stay True to GENIUS Act Goals
The dispute highlights a broader shift in payments. Stablecoins are expanding beyond trading. More merchants are now testing digital dollars for quick, low-cost payments. This has fueled interest in rewards tied to stablecoin spending.
Banks see this momentum as a direct challenge. Stablecoins offer fast settlement without the need for card networks. They also move value without the credit-based system that banks depend on. This difference creates friction between the sectors.
Coinbase believes stablecoin rewards will support wider adoption. Banks believe the rewards could accelerate the decline of traditional deposits. The disagreement now sits before regulators. Their interpretation of the GENIUS Act will shape how stablecoin payments grow from here.
