Coinbase CEO Sounds Alarm: Reopening GENIUS Act Could Derail Crypto’s Mainstream March

Brian Armstrong throws cold water on legislative revival as Washington's stablecoin war intensifies.

The Regulatory Chessboard

Forget quiet backroom deals—the fight for the soul of the dollar's digital future is playing out in public view. The GENIUS Act, a legislative framework once considered dormant, is back on the table, sparking fierce debate. Its potential revival has Coinbase's chief executive issuing a stark warning, framing it not as progress but as a potential roadblock to U.S. competitiveness. The core tension? How to govern stablecoins—those digital tokens pegged to traditional assets like the U.S. dollar—without stifling the innovation that threatens to reshape global finance. It's a classic D.C. dilemma: regulate for safety or step aside for speed.

The Innovation vs. Oversight Tug-of-War

Proponents of the act argue it brings necessary clarity and consumer protection to a wild-west market. Critics, like Armstrong, see it as redundant bureaucracy that could push development overseas. The real battleground is sovereignty. Should the rules for a global, borderless technology be penned primarily by one nation's lawmakers? Or does that inherently cede ground to more agile jurisdictions? The debate cuts to the heart of whether America leads the next financial revolution or merely audits it.

Market Reactions and Ripple Effects

While politicians debate clauses, the market isn't waiting. Major financial institutions continue building stablecoin infrastructure, betting that workable regulation—or clever workarounds—will emerge. The uncertainty itself acts as a perverse incentive, fueling decentralized alternatives that explicitly bypass traditional gatekeepers. It's the fintech version of building a moat while the castle walls are still being debated by committee—a process about as efficient as a hedge fund's ESG report.

The path forward remains murky. Legislative momentum clashes with technological momentum, leaving the industry in a holding pattern punctuated by CEO soundbites and regulatory whispers. One thing's clear: the outcome won't just define stablecoins; it will signal whether the old financial guard can truly coexist with the new digital vanguard, or if they're simply destined to talk past each other until the next market cycle renders the debate obsolete.

In brief

• Brian Armstrong says reopening the GENIUS Act would harm stablecoin competition and delay progress after months of legislative negotiations.
• Banks are accused of lobbying to block stablecoin rewards that allow crypto platforms to share yield with users.
• Proposed changes could restrict both direct and indirect reward models used by stablecoin platforms and third parties.
• Lawmakers are also weighing tax relief proposals for small stablecoin payments and crypto staking rewards.

Armstrong Draws ‘Red Line’ on Changes to GENIUS Act

In a post shared Sunday on X, Armstrong stated that reopening the GENIUS Act WOULD cross a “red line.” He argued that banks are lobbying to block stablecoin rewards and limit the role of fintech platforms. Coinbase, he added, would push back against any effort to revise the legislation after months of negotiations.

According to Armstrong, resistance from banks reflects a short-term mindset. He predicted that financial institutions would eventually support stablecoin rewards once they saw the business opportunity. Current lobbying efforts, he maintained, have slowed progress and raised ethical concerns rather than improving consumer protection.

Lawmakers designed the GENIUS Act to balance innovation with oversight. The law prevents stablecoin issuers from paying interest directly but allows platforms and third parties to offer rewards through other structures. That distinction has become a key point of disagreement between banks and crypto companies.

Banks Warn on Stablecoin Rewards as Crypto Platforms Share Yield

The debate intensified after comments from Max Avery, a board member and business development executive at Digital Ascension Group. He explained why some banks want lawmakers to revisit the act and warned that proposed changes could sharply reduce stablecoin rewards.

Avery highlighted several issues behind bank opposition:

• Proposed amendments could restrict both direct and indirect stablecoin rewards.
• Platforms could lose the ability to share yield through third-party programs.
• Banks earn about 4% on reserves held at the Federal Reserve.
• Traditional savings accounts often pay little or no interest.
• Research shows no clear evidence of major deposit losses at community banks.

Banks are framing the issue as a safety concern while protecting profit margins, Avery said. Stablecoin platforms, he argued, challenge the existing system by sharing returns with users, putting pressure on banks to change long-standing practices.

Discussion around stablecoins now extends beyond rewards. Last week, US lawmakers introduced a draft bill to ease tax rules for everyday crypto use. Representatives Max Miller and Steven Horsford proposed exempting stablecoin payments of up to $200 from capital gains taxes, making them easier to use for daily spending.

Other provisions would allow users to delay reporting income from staking and mining rewards for up to 5 years. Taken together, the proposals show that stablecoins are playing an increasingly prominent role in US financial and tax policy debates.

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