Coinbase warns it may drop support for crypto market bill over stablecoin rewards

Coinbase Global Inc. is putting lawmakers on notice that it might walk away from a key digital asset bill if new restrictions threaten its ability to pay customers who hold stablecoins on its platform.

The nation’s biggest cryptocurrency exchange could reverse its backing for legislation aimed at creating rules for the crypto market, which lawmakers plan to release Monday and review in Senate committee proceedings Thursday, a source close to the company told Bloomberg. The exchange wants any provisions about customer rewards limited to requiring more transparency, rather than outright bans or major limitations.

Some proposals being discussed would only let licensed financial institutions offer such rewards, according to people working in the industry. Traditional banks support this approach, saying accounts that pay returns on stablecoins would pull money out of regular banks.

Coinbase has asked regulators for a national trust charter that might eventually qualify it to provide rewards under these tighter rules. However, crypto companies want to keep offering platform rewards without needing such approval, warning that stronger limits could hurt fair competition.

The possibility of Coinbase pulling its support carries weight

Crypto companies spent more money on the 2023-2024 election than any other industry sector, pouring massive amounts into campaigns for their preferred politicians. Coinbase, run by co-founder and chief executive Brian Armstrong, gave $1 million to Donald Trump’s swearing-in ceremony and is helping fund the president’s planned White House ballroom.

These rewards matter greatly to Coinbase’s bottom line. The company and Circle Internet Group Inc. split some of the interest earned from money backing Circle’s USDC stablecoin. USDC sitting in Coinbase accounts creates a reliable income that becomes especially important when crypto prices drop. Coinbase also holds a minority ownership in Circle, which is now the top stablecoin company following rules set by federal law passed in July.

The exchange gets customers to keep USDC on its platform by giving 3.5% rewards on Coinbase One account holdings. If the new bill blocks this perk, fewer users might store stablecoins there, potentially cutting into Coinbase’s total stablecoin earnings, which Bloomberg figures show could have hit $1.3 billion in 2025.

The final impact depends on exactly how lawmakers write the bill. But people involved in the talks say some language about rewards will definitely appear in the legislation.

Trump’s second term brought quick victories for digital money companies, including the first nationwide rules for stablecoin issuers through the GENIUS Act in July. After Trump signed it, stores and traditional finance companies rushed to announce stablecoin plans. The Trump family even launched its own stablecoin called USD1 through World Liberty Financial before the law took effect.

While the administration wants more bills passed quickly, the rewards question has damaged the bipartisan agreement on the market bill. Coinbase’s warning about possibly withdrawing support shows growing friction that might delay the legislation, potentially killing any chance of passage this year. Without support from both parties during markup, Bloomberg Intelligence analyst Nathan Dean estimates the odds of something passing in the first six months drop below 70%.

What the GENIUS Act already settled

The GENIUS Act stops stablecoin issuers from paying interest or returns just for holding tokens, but it allows third-party partners like Coinbase to offer rewards based on customer balances.

Banks have criticized exchanges paying stablecoin rewards, arguing this threatens to drain money from banking and weaken local lending.

“If billions are displaced from community bank lending, small businesses, farmers, students, and home buyers in towns like ours will suffer,” the American Bankers Association wrote recently. “Crypto exchanges and the constellation of stablecoin-affiliated companies are not designed to fill the lending gap, nor will they be able to offer FDIC-insured products, a point they omit from their aggressive advertising.”

Crypto companies counter that banks are trying to reverse what the GENIUS Act already settled. Faryar Shirzad, Coinbase’s chief policy officer, wrote on X that keeping stablecoin rewards helps maintain dollar dominance, pointing out that China recently said it would pay interest on its digital yuan.

Lawmakers face a difficult choice

This puts senators in a tough spot, pressured by the administration to pass legislation while facing an issue where the middle ground seems hard to find.

One compromise might restrict rewards to entities with banking licenses or financial charters, sources said. Five crypto companies recently got preliminary approval from the Office of the Comptroller of the Currency to become national trust banks, though banking groups fought these approvals hard, claiming crypto firms are stretching the charter’s purpose and could threaten financial stability.

Even with restrictions, some industry insiders think crypto firms would just find new ways around them.

“There’s no world in which we won’t be able to reward consumers for taking actions within applications,” William Gaybrick, president of technology and business at Stripe, said last year. “In a world where you’re holding stablecoins within an app, that application will find some way to give you credit for doing so.”