How Coinbase and PayPal Keep Offering Stablecoin Rewards Despite the GENIUS Act Ban (2025 Update)
- The GENIUS Act Crackdown: Why Stablecoin Yields Became Taboo
- Distributors vs. Issuers: The Legal Loophole Exploited
- The $2T Elephant in the Room
- FAQ: Your Burning Questions Answered
The GENIUS Act has shaken up the crypto world by banning stablecoin issuers from offering yield—but giants like Coinbase and PayPal are still rewarding users with attractive APYs. How? By exploiting a legal loophole: they’re not the issuers. Dive into the regulatory gray zone, the 4.7% rewards war, and why this battle matters for the $2T stablecoin market.
The GENIUS Act Crackdown: Why Stablecoin Yields Became Taboo
When the GENIUS Act passed in 2024, it drew a hard line: stablecoin issuers can’t pay interest or yields. Regulators argued these incentives blurred the line between payment tools (stablecoins’ intended use) and investment products. But here’s the twist—while Circle (issuer of USDC) had to scrap its yield programs overnight, platforms like Coinbase and PayPal kept their reward engines humming at 3.7%-4.7% APY. The secret? A technicality sharper than a bitcoin halving.
Distributors vs. Issuers: The Legal Loophole Exploited
Coinbase CEO Brian Armstrong spelled it out during a 2025 earnings call:This semantic judo lets Coinbase offer 4.7% on USDC holdings (up from 3.5% pre-Act) while Circle, the actual issuer, can’t touch yield products. PayPal plays the same game—its PYUSD stablecoin, issued by Paxos, now dangles 3.7% rewards to lure users. Critics call it regulatory arbitrage; Armstrong calls it "giving people reasons to trust crypto."
The $2T Elephant in the Room
Behind this rewards arms race lies a staggering projection: the stablecoin market could hit $2 trillion by 2030 (TradingView, 2025). With Visa and Mastercard sweating over stablecoins’ payment dominance, rewards became the battleground for user retention. "It’s why people park funds with us," admits a Coinbase exec. But regulators are watching—Senator Warren’s office recently hinted at "closing the distributor loophole" in upcoming amendments.
FAQ: Your Burning Questions Answered
How can Coinbase pay 4.7% if yields are banned?
The GENIUS Act only restricts issuers (like Circle for USDC). Coinbase, as a distributor, classifies payments as "rewards" from its own revenue—not interest from the stablecoin itself.
Is PayPal’s 3.7% PYUSD reward sustainable?
Analysts note PayPal funds these through transaction fees and lending margins. The BTCC team suggests monitoring Paxos’ quarterly reports for strain signals.
Could regulators shut this down?
Possible—but not without backlash. Over 60% of stablecoin holders now expect rewards (CoinMarketCap survey, 2025). Any crackdown WOULD face fierce industry pushback.
