Coinbase Defies GENIUS Act to Continue Offering Stablecoin Rewards

Despite the recent enactment of the GENIUS Act, which prohibits stablecoin issuers from offering interest or passive income, major platforms like Coinbase and PayPal are finding ways to continue providing returns to users. Coinbase CEO Brian Armstrong confirmed during the Q2 earnings call that the exchange will maintain its 4.1% annual rewards on USDC balances. The GENIUS Act, signed into law last month, aims to restrict stablecoins to payment purposes rather than allowing them to function as investment vehicles. This move by Coinbase and PayPal highlights the ongoing tension between regulatory frameworks and the innovative practices of cryptocurrency platforms. The companies' ability to circumvent the restrictions suggests a potential loophole or creative compliance strategy, which could set a precedent for other firms in the industry. As of August 2025, the situation remains fluid, with regulators likely to scrutinize these practices closely. The defiance of the GENIUS Act underscores the challenges of enforcing traditional financial regulations in the rapidly evolving crypto space. Investors and users are closely watching how this regulatory clash unfolds, as it could significantly impact the future of stablecoin offerings and their role in the broader financial ecosystem.

Coinbase and PayPal Circumvent GENIUS Act to Offer Stablecoin Returns

Coinbase and PayPal continue to provide users with returns on stablecoin balances despite the GENIUS Act's prohibition on issuers offering interest or passive income. The legislation, signed into law last month, aims to restrict stablecoins to payment uses rather than investment vehicles.

Coinbase CEO Brian Armstrong confirmed during the Q2 earnings call that the platform will maintain its 4.1% annual rewards on USDC, emphasizing these are not interest payments. The distinction lies in Coinbase's non-issuer status—USDC is issued by Circle, allowing the exchange to sidestep regulatory restrictions.

PayPal follows a similar strategy with its PYUSD stablecoin, offering 3.7% annual returns through Paxos as the issuer. Both companies demonstrate how crypto platforms adapt to regulatory constraints while maintaining user incentives.

Coinbase’s Base Network Resolves Critical Block Production Halt

Coinbase's LAYER 2 solution, Base, faced a significant disruption on August 5, 2025, when block production ceased for approximately 19 minutes. The halt, detected via BaseScan and OKLink data, triggered immediate intervention from technical teams to restore network stability.

Block height froze at 33,792,704, suspending deposits, withdrawals, and Flashblock transactions. While no official cause was disclosed, preliminary analysis points to a communication failure between producer nodes and validators. Third-party monitoring tools flagged the issue, prompting automated alerts.

Engineers resolved the outage by 10:44 TSI, demonstrating Base's resilience. The incident underscores the growing pains of scaling solutions as institutional adoption accelerates.

Base Network Experiences First Downtime Since Launch, Halting Operations for 29 Minutes

Base, Coinbase's ethereum layer-2 scaling solution, suffered its first operational disruption since its 2023 debut. The network ceased block production, deposits, withdrawals, and flashblock operations for 29 minutes before services were restored.

The outage occurred at 06:15 UTC due to an "unsafe head delay," a technical fault that impeded block confirmation. The team identified and resolved the issue by 06:44 UTC, implementing additional monitoring to prevent recurrence.

This incident marks a notable break in Base's previously unblemished uptime record. The network has become a significant player in Ethereum's layer-2 ecosystem, amassing $4.2 billion in total value locked—$1.5 billion of which is tied to the Morpho lending protocol.

Base Network Outage Disrupts Transactions, Highlights Decentralization Concerns

Coinbase's Ethereum Layer-2 network Base suffered a 30-minute outage on August 5, 2025, halting block production at height 33,792,704. The disruption froze deposits, withdrawals, and Flashblocks operations—marking the network's first major downtime since launch.

While quickly resolved, the incident reignited debates about infrastructure reliability in decentralized ecosystems. "It's a sharp reminder that decentralization still matters," tweeted @VJweb3, juxtaposing Base's stumble against hypothetical "lightning fast" chains.

The outage occurred as Base reportedly surpassed solana in new token launches, compounding scrutiny of its technical resilience during growth phases. Network operators continue monitoring stability after restoring operations.

Base Blockchain Resumes Operations After Brief Outage

Coinbase's Base blockchain network experienced a 30-minute disruption in block production early Tuesday, halting deposits, withdrawals, and dApp activity. The outage began at 6:15 UTC at block height 33,792,704 before resolving by 6:44 UTC.

While Base hasn't disclosed root causes, network strain appears likely. The chain has seen explosive growth since integrating decentralized tools like Zora and Farcaster through its Everything App launch. Token creation surged from 6,600 to nearly 50,000 in July alone.

The incident highlights scaling challenges as Layer 2 networks gain traction. Base's relatively quick recovery contrasts with longer outages seen on competing chains during congestion events.

Coinbase Plans $2 Billion Convertible Note Offering

Coinbase is seeking to raise $2 billion via convertible notes, a strategic MOVE to bolster its balance sheet without immediate equity dilution. The capital will fund technology development, operational scaling, and opportunistic acquisitions as the exchange positions itself for long-term dominance in the volatile crypto sector.

Convertible debt structures allow Coinbase to tap investor appetite while deferring potential share conversion risks. The offering signals confidence in institutional demand for crypto exposure despite recent market turbulence.