The exchange believes the proposal oversteps the GENIUS Act and unfairly targets crypto businesses. Banks claim stablecoin perks amount to “indirect interest,” while Coinbase insists the law applies only to stablecoin issuers and warned that banks are trying to control how consumers use their own money. Despite the pressure, Coinbase’s policy chief Faryar Shirzad says he is still confident that regulators will rely on the law’s plain text rather than expand its scope. Coinbase Clashes With Banks Crypto exchange Coinbase sharply criticized a coalition of US banking groups for urging regulators to ban merchant rewards, cashbacks and discounts tied to stablecoin payments, calling the proposal “unamerican” and an overreach that goes beyond what the law requires. The dispute centers on the GENIUS Act, which bars stablecoin issuers from offering interest or yield to token holders. Banking lobbyists argue this prohibition should extend indirectly to crypto exchanges and affiliated businesses, as they claim rewards offered by third parties amount to “indirect interest” if those entities have financial ties to the stablecoin issuer. Coinbase’s chief policy officer Faryar Shirzad rejected that interpretation in a post on X , and called on regulators to “stick to the statutory text.” He also warned that bank lobbyists are trying to dictate how Americans use their own money after a stablecoin is issued. He argued that the banking sector’s stance is rooted in fear that stablecoins could disrupt the traditional financial system, where banks rely heavily on customer deposits to support lending. That concern isn’t unfounded. In fact, a US Treasury estimate from April suggested widespread stablecoin usage could pull more than $6.6 trillion in deposits out of banks. Coinbase also claims stablecoins could meaningfully reduce merchant payment costs, including the more than $180 billion in card fees paid by US retailers in 2024. If third-party rewards programs are shut down, Coinbase argues, merchants and consumers would be pushed back toward traditional card networks that benefit from high fees. Banking groups, however, seem determined to block any stablecoin-based payment model that could erode bank deposits or challenge entrenched payments infrastructure. Crypto exchanges have clear incentives to defend stablecoin usage , as higher stablecoin payment and trading activity generates additional revenue. Many exchanges issue branded credit cards offering crypto rewards or cashbacks, a model Coinbase now worries could be jeopardized if regulators adopt the banks’ interpretation. Even so, Shirzad said he is still hopeful that “common sense will prevail” and that regulators won’t expand the GENIUS Act’s restrictions beyond what Congress intended.
