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Crypto exchange Coinbase has slammed US banking groups for asking regulators to ban merchant rewards, cashbacks and discounts offered to customers who pay with stablecoins, calling the demand “un-American.”
The conflict is related to the statutory language of the GENIUS Act, which prohibits stablecoin issuers from offering interest or yield to token holders, but does not explicitly extend the ban to crypto exchanges or affiliated companies.
The banking groups claim that an “indirect interest” arises when a third party benefits financially and has a connection to the stablecoin issuer. Faryar Shirzad, Coinbase’s director of policy, strongly opposed that view in a place at X on Thursday and asked regulators to “adhere to the statutory text.”
“There’s something un-American about bank lobbyists pressuring regulators to tell stablecoin customers what they can and can’t do with their money after it’s issued.”
Banking groups are apparently worried that the widespread adoption of performance stablecoins could undermine the banking systemwhich relies on banks attracting deposits with high-interest savings products to support the loans they make.
Stablecoins expected to take blood from the bank
The widespread adoption of stablecoins could result in more than $6.6 trillion in deposit outflows from the traditional banking system, according to an estimate by the Department of the Treasury of the United States in April.
Coinbase has argued that stablecoins could reduce more than $180 billion in card fees that US merchants pay by 2024; however, “big banks” continue to stand in the way and prevent stablecoin innovations from challenging the traditional payment system.
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“If third parties are prevented from providing these benefits, consumers are less likely to see stablecoins as a viable payment alternative, and merchants will continue to pay high fees.”
Centralized exchanges benefit when stablecoin trading grows
Companies like Benefit of Coinbase from stablecoin adoption, as they earn fees from increased trading volume on their exchange.
Many crypto exchanges are issuing credit cards to incentivize merchant spending with cashback and crypto rewards — an offer Shirzad fears is under threat, but remains optimistic that “common sense will prevail.”
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