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Coinbase Slams Banks for Trying to Ban Stablecoin Rewards

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Coinbase has mounted a fierce protection of stablecoin reward packages, accusing banking associations of trying to broaden Congress’s curiosity prohibition past its statutory limits illegally.

The crypto trade’s pushback targets efforts by financial institution lobbyists to classify service provider reductions and third-party advantages as prohibited “oblique curiosity” underneath the GENIUS Act.

Chief Policy Officer Faryar Shirzad argued that banking associations are misinterpreting congressional intent by claiming service provider rewards tied to stablecoin funds represent unlawful curiosity.

“Congress was clear that the GENIUS Act solely prohibits curiosity/yield paid by the issuer, and nothing else,” Shirzad said on X, warning that increasing the ban to third-party advantages would create “unprecedented, far-reaching and unpredictable” implications.

Banking Groups Push Expansive Interest Ban

The American Bankers Association and 52 state banking associations submitted letters to the Treasury urging strict implementation of the GENIUS Act’s curiosity prohibition.

Their November 4 submitting proposes defining “curiosity or yield” broadly to embody any financial profit, stopping evasion by associates, and treating oblique funds as in the event that they had been issuer funds.

Brooke Ybarra, ABA’s senior vice chairman of innovation and technique, told the group’s annual conference that “a detriment can be permitting Coinbase or Kraken to pay curiosity on cost stablecoins.”

Jess Sharp, ABA senior vice chairman, acknowledged the problem forward.

“This will not be a straightforward combat, it’s a really effectively resourced group on the opposite aspect,” Sharp stated. “Banks take deposits and convert them into loans, that’s what we do, and fewer deposits means fewer loans.”

The associations warned that neighborhood banks face explicit vulnerability to deposit outflows, citing evaluation displaying disintermediation may get rid of roughly $1.5 trillion in lending capability and shrink small enterprise and farm credit score by $110 billion and $62 billion, respectively.

Coinbase Argues Consumer Harm

Coinbase Institute’s argument reveals an evaluation that U.S. retailers paid over $180 billion in card charges in 2024, prices that stablecoins may assist cut back.

The firm’s November 4 Treasury submission emphasised that the GENIUS Act prohibits solely permitted cost stablecoin issuers from paying curiosity “solely in reference to the holding, use, or retention” of stablecoins.

“The statute addresses funds by issuers solely—nowhere does the textual content reference ‘oblique’ curiosity, associates, or third-party advantages,” Coinbase wrote, including that “treating third-party rewards or loyalty packages as prohibited curiosity would rewrite Congress’s carefully-drawn traces.”

The trade warned that broad curiosity bans would harm shoppers by eliminating market-based incentives that decrease cost prices and spur service provider acceptance.

Coinbase cited situations the place small companies providing reductions for stablecoin funds may face prohibition in the event that they keep any relationship with issuers, even routine API integrations.

UK Expansion Amid Similar Regulatory Pressure

This new response comes as Coinbase recently launched a 3.75% AER savings account for UK users by ClearBank, providing FSCS safety of up to £85,000, efficient November 11.

The transfer positions the trade to compete with conventional British banks, the place main establishments like HSBC and NatWest pay between 1.15% and three.5%.

Keith Grose, CEO of Coinbase UK, framed the providing as constructing “the UK’s no 1 monetary app.“

The launch coincides with the Bank of England proposing a £20,000 cap on particular person stablecoin holdings.

Coinbase vice chairman Tom Duff Gordon known as the restrictions “dangerous for UK savers, dangerous for the City and dangerous for sterling.”

Notably, Shirzad additionally published a Telegraph commentary criticizing the Bank’s extreme warning, arguing these constraints danger “deterring adoption and innovation, making GBP stablecoins unusable for wholesale markets, and undermining the UK’s international competitiveness.“

He famous that dollar-denominated stablecoin USDC has operated for almost six years with out proof of destabilizing deposit flight.

Shirzad additionally argued that the majority stablecoin demand originates outdoors the U.S., increasing greenback dominance globally somewhat than competing with native banks. Standard Chartered tasks that over $1 trillion may movement from emerging-market banks into stablecoins by 2028.

Treasury’s rulemaking choices will decide whether or not stablecoins fulfill Congress’s imaginative and prescient of cost innovation or face restrictions that restrict their sensible utility.

The submit Coinbase Slams Banks for Trying to Ban Stablecoin Rewards appeared first on Cryptonews.

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