Prohibiting rewards associated with stablecoin payments is un-American: Coinbase

Cryptocurrency exchange Coinbase has slammed a group of U.S. banks for asking regulators to ban merchant benefits, cashbacks and discounts offered to customers who pay with stablecoins, calling the request “un-American.”

The conflict concerns the legal text of the GENIUS Act, which prohibits stablecoin issuers from offering interest or yield to token holders, but the law does not explicitly extend that prohibition to cryptocurrency exchanges and related companies.

The banking group argues that an “indirect benefit” occurs when a third party has a connection to a stablecoin issuer that benefits financially. However, Coinbase Chief Policy Officer Faryal Shirzad strongly disagreed with that view in a post on X on Thursday, calling on regulators to “follow the letter of the law.”

“There is something un-American about bank lobbyists asking regulators to tell stablecoin customers what they can and cannot do with their money once it is issued.”

Banking groups appear concerned that the proliferation of high-yielding stablecoins could undermine a banking system that relies on banks collecting deposits in high-interest savings products to back loans.

sauce: Faryal Shirzad

Stablecoins are expected to have banking roots

The U.S. Treasury estimated in April that the proliferation of stablecoins could drain more than $6.6 trillion in deposits from the traditional banking system.

Coinbase claimed that stablecoins could reduce more than $180 billion in card fees paid by U.S. merchants in 2024. However, “big banks” continue to stand in the way, preventing stablecoin innovations from challenging traditional payment systems.

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“If third parties are no longer able to offer these benefits, consumers will be less likely to consider stablecoins as a viable payment method, and merchants will continue to pay higher fees.”

Centralized exchanges will benefit as stablecoin trading surges

Companies like Coinbase are benefiting from the introduction of stablecoins as they can earn fees from increased trading volumes on their exchanges.

Many crypto exchanges issue credit cards to encourage merchant spending by offering cashback and crypto perks. Shirzad is concerned that the service is under threat, but remains optimistic that “common sense will prevail.”

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