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Crypto Journalist
Anas Hassan
Crypto Journalist
Anas Hassan
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Coinbase has mounted a fierce defense of stablecoin reward programs, accusing banking associations of trying to expand Congress’s prohibition on vested interests beyond its statutory limits illegally.
The crypto exchange pushback targets efforts by bank lobbyists to classify merchant discounts and third-party benefits as prohibited.”indirect interest” under the GENIUS act.
Chief Policy Officer Faryar Shirzad argued that the banking associations misinterpreted the intent of Congress by declaring that merchant rewards tied to stablecoin payments constituted illegal interest.
“Congress was clear that the GENIUS Act only prohibits interest/yields paid by the issuer, and nothing else.,” Shirzad said on X, warning that expanding the ban to third-party benefits would create “unprecedented, far-reaching and unpredictable” implications.
Banking Groups Push for Expansive Interest Bank
The American Banking Association is 52 state banking associations submitted letters to the Treasury urging strict implementation of the GENIUS Act interest prohibition.
His presentation of November 4 proposes to define “interest or yield” broadly to include any economic benefit, preventing evasion through affiliates, and treating indirect payments as if they were issuing payments.
Brooke Ybarra, ABA’s senior vice president of innovation and strategy, said annual convention of the organization that “a detriment would be allowing Coinbase or Kraken to pay interest on payment stablecoins.”
Jess Sharp, senior vice president of the ABA, acknowledged the challenge ahead.
“This is not an easy fight, it is a very well resourced group on the other side” Sharp said.Banks take deposits and convert them into loans, that’s what we do, and less deposits means less loans.”
The associations warned that community banks face particular vulnerability to deposit flows, citing analyzes that show disintermediation could eliminate about $1.5 trillion in lending capacity and reduce agricultural and small business credit by $110 billion and $62 billion, respectively.
Coinbase argues harm to consumers
The Coinbase Institute’s argument shows an analysis that American merchants will pay more than $180 billion in card fees in 2024, costs that stablecoins could help reduce.
The company November 4 submission of the Treasury emphasized that the GENIUS Act only prohibits payment stablecoin issuers allowed to pay interest”only in connection with holding, use or retention” of stablecoins.
“The statute addresses payments from issuers only – nowhere does the text refer to “indirect” interest, affiliates or third-party benefits.Coinbase wrote, adding that “Treating third-party rewards or loyalty programs as prohibited interest would rewrite the lines carefully drawn by Congress.”
The exchange warned that the broad interest ban would hurt consumers by eliminating market-based incentives that lower payment costs and boost merchant acceptance.
Coinbase cited scenarios where small businesses that offer discounts for stablecoin payments could face the ban if they maintain any relationship with the issuers, even routine API integrations.
UK Expansion Amid Similar Regulatory Pressure
This new answer comes as Coinbase recently launched a 3.75% AER savings account for UK users through ClearBank, which offers FSCS protection of up to £85,000, effective November 11.
The move positions the exchange to compete with traditional British banks, where major institutions such as HSBC and NatWest charge between 1.15% and 3.5%.
Keith Grose, CEO of Coinbase UK, framed the offer as building “the UK’s number 1 financial app.“
The launch coincides with the The Bank of England offers a cap of £20,000 on individual stablecoins.
Coinbase Vice President Tom Duff Gordon called the restrictions “bad for UK savers, bad for the City and bad for sterling.”
Especially, Shirzad too published a Telegraph commentary criticizing the Bank’s excessive caution, arguing that these limitations risk “hindering adoption and innovation, making GBP stablecoins unusable for wholesale markets, and undermining the UK’s global competitiveness.“
He noted that dollar-denominated stablecoin USDC has operated for nearly six years without evidence of destabilizing deposit flight.
Shirzad also argued that most of the demand for stablecoins originates outside the United States, expanding the dominance of the dollar around the world rather than competing with local banks. Standard Chartered projects that more than $1 trillion could flow from emerging market banks in stablecoins by 2028.
The Treasury’s regulatory decisions will determine whether stablecoins fulfill Congress’s vision of payment innovation or face restrictions that limit their practical utility.
