Coinbase Slams US Banks’ Proposal to Ban Stablecoin Rewards

Highlights:

• Banks want to stop stablecoin rewards, but Coinbase says this unfairly targets crypto. 
• Coinbase rejected banks’ GENIUS Act interpretation, saying it wrongly limits stablecoin payment use.
• Treasury warned stablecoins could shift over $6.6 trillion from banks.

A new clash started in Washington after big US banking groups asked regulators to stop merchant rewards, cashbacks, and discounts linked to stablecoin payments. Coinbase replied strongly, saying the proposal goes against the GENIUS Act and unfairly targets crypto payments. The exchange said the banks are trying to stretch the law beyond its clear limits, a move Coinbase called “unamerican.”

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Banking Fears Over Stablecoin Growth

The dispute grew because banks are giving a different meaning to the GENIUS Act, a federal law that stops stablecoin issuers from offering interest or yield. Banks are saying that even rewards from other companies count as “indirect interest” if those companies have any link to a stablecoin issuer. Coinbase rejected this view, saying it changes the meaning of the law instead of using the simple and clear wording.

Faryar Shirzad, Coinbase’s policy chief, said regulators should “stick to the statutory text.” He said the banking groups are trying to control how Americans use their money once a stablecoin is in the market. Shirzad warned that this pressure comes from fear inside the banking sector, not from real customer protection.

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

— Faryar Shirzad 🛡️ (@faryarshirzad) November 13, 2025

Concerns in traditional finance extend far beyond reward programs. A Treasury report in April said that if stablecoins become widely used, more than $6.6 trillion in bank deposits could move out of banks. This illustrates why banks are opposed to anything that facilitates the use of stablecoins in everyday payments. Coinbase said stablecoins can cut payment costs for merchants. US retailers paid over $180 billion in card fees last year. 

Coinbase Warns Reward Ban Could Raise Costs and Hurt Crypto Revenue

Coinbase argued that banning third-party stablecoin rewards will push businesses back to old card networks that make money from high fees. This would put merchants under the same cost problems that stablecoin payments were meant to solve. The exchange said this proposal could slow down innovation and reduce new choices for payment partners and everyday users. “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 paying hefty fees,” he added.

Crypto businesses also face direct revenue risks. Rising stablecoin trading and payment activity strengthens profit models for many exchanges. A number of platforms already issue branded cards that grant crypto rewards or cashbacks, and Coinbase now worries that such offerings could be interrupted if regulators accept the banks’ interpretation of the law.

Even with rising tension, Shirzad said he expects regulators to rely on common sense and avoid stretching the GENIUS Act to areas Congress never mentioned. He expressed confidence that authorities will recognize that the proposal circles far outside the law’s original scope.

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