Coinbase Strikes Back: Crypto Giant Defies US Banks Attempting to Kill Stablecoin Rewards

Wall Street's latest tantrum meets crypto's defiance.

Coinbase just weaponized its legal team against traditional finance's lobbying assault on stablecoin yields—turning regulatory pressure into a public battle cry for DeFi adoption.

The playbook? When banks cry 'risk,' crypto builds armor.

Bonus jab: Meanwhile, legacy institutions still can't decide whether to ban stablecoins or launch their own half-baked versions. Schrödinger's innovation.

• Coinbase attacks U.S. banks over their push to ban cashback and rewards for stablecoin payments, calling it “un-American.”
• Banks fear stablecoins could drain $6.6 trillion in deposits and reduce $180B in annual credit card profits.
• Coinbase argues stablecoin rewards drive adoption, benefiting exchanges and merchants by lowering transaction costs.

Coinbase has launched a pre-emptive attack against prominent U.S. banking institutions after they requested that the government ban cashback, discounts, and other reward structures offered to merchants who accept stablecoin payments. Coinbase described the request as “un-American.

The contentious issue is the GENIUS Act, a legislation that forbids the provision of interest/yield directly to the holders through stablecoins. The banking community is seeking the extension of such a prohibition to crypto exchanges and related organizations since any reward distributed through a third party constitutes “indirect interest.”

“But Coinbase’s chief policy officer, Faryar Shirzad, responded to that view in a posting on X, advising regulators to “stick to the statutory text” and not go beyond the “intended scope of the law”.

The banking associations are arguing that merchant rewards tied to stablecoin payments are “indirect interest” should be banned. Two problems with this argument: (1) Congress was clear that the GENIUS Act only prohibits interest/yield paid by the issuer, and nothing else; and (2)… pic.twitter.com/SqHawjm0Es

“What’s not American about banking lobbyists pushing government regulators to tell stablecoin holders what they can and cannot do with funds after it’s been issued?” Shirzad explained.

Coinbase Highlights Banks’ Stablecoin Profit Threat

Behind the push is the rising fear of banks that the emergence of stablecoins could pose a threat to the very business of these institutions: consumer deposits.

An estimate by the US Treasury, published in April, found that the widespread adoption of stablecoins could drain over $6.6 trillion from the banking system. With fewer deposits, the banking system will have less funding to lend, thus threatening the banking industry.

Coinbase explains that the use of stablecoins could also slash the $180 billion annual credit card fees that merchants pay in the US alone by the year 2024. These fees currently contribute a considerable chunk of the profits that large banks make and are the reason behind the reluctance of these banks, according to Coinbase.

“If third-party reward providers are not able to offer rewards, fewer people will view stablecoins as a viable payment choice. And merchants will be left paying excessive fees.”

Coinbase Confident in Stablecoin Rewards

Crypto exchanges such as Coinbase will benefit if stablecoins become widely used. The more transactions that are performed, the more profit the exchange will make.

Here’s an idea: How about a new Stablecoin Bootstrap Fund?

Today, we’re launching our next Bootstrap Fund — deepening stablecoin liquidity in DeFi and helping teams grow their protocols. pic.twitter.com/varQRlZb9a

Debit and credit cards are also being issued that give cash back rewards and crypto prizes. Shirzad explained that these might be threatened if the government accepts the banks’ claims, but the activist remains optimistic that the government will make the right judgment.

Yet, despite the rising level of tension, Coinbase remains optimistic that the end result will be beneficial to innovation.

“Common sense will prevail,” Shirzad declared, reflecting his confidence that the government will not crack down on the reward system of stablecoins merely to protect the banking sector.