Coinbase Global Inc., the largest cryptocurrency exchange in the United States, has signaled it might withdraw support from a key digital asset bill if new restrictions on stablecoin rewards are enacted. Lawmakers plan to release the proposed legislation Monday, with Senate committee review scheduled for Thursday, but Coinbase warns that overly restrictive rules could undermine its ability to pay customers who hold stablecoins on its platform. The exchange seeks transparency requirements rather than outright bans or severe limitations on these rewards.
Proposals under consideration could restrict stablecoin rewards to licensed financial institutions, a position supported by traditional banks concerned that yield-bearing crypto accounts could divert deposits from regular banking systems. Coinbase has requested a national trust charter that might allow it to offer rewards under tighter regulations, but the company and other crypto firms are pushing to continue these incentives without additional approvals.
The potential withdrawal of Coinbase’s support carries significant weight given the industry’s political influence. Crypto companies were the top sector in 2023-2024 election spending, with Coinbase itself contributing $1 million to Donald Trump’s swearing-in ceremony and backing White House events. Stablecoin rewards are a major revenue driver for Coinbase. By splitting interest earned on USDC with Circle Internet Group Inc., Coinbase generates predictable income, particularly valuable during market downturns. USDC holders on Coinbase earn 3.5% through Coinbase One accounts, a benefit that keeps capital on the platform and could reach $1.3 billion in annual stablecoin earnings by 2025. Blocking these rewards could reduce user deposits and overall revenue.
The issue reflects broader regulatory tension. The GENIUS Act, passed in July, prohibited stablecoin issuers from offering interest simply for token holdings but allowed third-party partners like Coinbase to provide rewards. Banks have criticized such programs, arguing they threaten community lending and could weaken local financial ecosystems. Crypto advocates counter that rewards programs support innovation and maintain the U.S. dollar’s dominance in digital finance, noting that countries like China have begun offering interest on their digital currencies.
Lawmakers now face a difficult compromise. Some proposals would limit rewards to entities with banking licenses or national trust charters, a framework five crypto companies recently obtained preliminary approval for, despite objections from traditional banking groups. Even with restrictions, industry insiders believe firms will find alternative mechanisms to incentivize users. Experts suggest that maintaining stablecoin rewards is critical for market growth and competition, and a failure to reconcile these differences could delay or block passage of the legislation this year.
As Congress navigates this debate, the outcome will have long-term implications for crypto market structure, investor confidence, and the balance between innovation and regulation. Coinbase’s warning underscores the high stakes and signals that the future of digital asset incentives remains a key flashpoint in U.S. crypto policy.
