important notes
Coinbase said it may reconsider its support for the cryptocurrency bill if US lawmakers decide to act against stablecoin rewards. Some U.S. policymakers are considering allowing stablecoin rewards only to regulated financial institutions, but not to crypto-native companies. Meanwhile, Coinbase has already applied for a national bank charter and earns a significant amount of revenue from USDC-based rewards, offering around 3.5% to users.
Ahead of the January 15 deadline for the long-awaited CLARITY Act cryptocurrency bill, crypto exchange Coinbase is ramping up its efforts to reward stablecoin holdings. CEO Brian Armstrong has previously expressed concerns about US lawmakers’ proposed restrictions on cryptocurrencies. The exchange said this feature is critical to its business model.
Coinbase expresses concern over restrictions in virtual currency bill
As reported by the Bloomberg publication, Coinbase remains concerned that the restrictions currently being discussed will become part of the Cryptocurrency Market Structure Bill.
The company notes that it may reconsider its support for the virtual currency bill if the bill creates further restrictions on stablecoin rewards beyond disclosure requirements.
Some US lawmakers are considering proposals to limit stablecoin rewards to regulated financial institutions. Additionally, some banks and financial players argued that such reward mechanisms could drive deposits away from traditional lenders. In a recent letter, the American Bankers Association wrote:
“Small businesses, farmers, students, and homebuyers in towns like ours will suffer when billions of people are taken out of community bank lending. Crypto exchanges and stablecoin companies are not designed to fill the lending gap, nor can they offer FDIC-insured products, something they omit from their aggressive promotions.”
But crypto-native companies have pushed back, warning that limiting compensation to authorized bodies would hurt competition.
Coinbase has applied for a National Trust Charter, which could allow it to offer rewards based on regulatory standards. Other market participants, including Trump’s World Liberty Financial, are making similar moves.
The importance of stablecoins to Coinbase
Stablecoin rewards are an important source of revenue for Coinbase. The exchange shares interest income from reserves supporting Circle’s USDC with Circle Internet Group.
USDC
$1.00
24 hour volatility:
0.1%
Market capitalization:
7.457 billion dollars
Vol. 24 hours:
$81.7 billion
stablecoin. Additionally, USDC balances held at Coinbase generate stable income.
To encourage adoption, Coinbase offers certain customers approximately 3.5% rewards on USDC balances. Coinbase’s stablecoin-related revenue will soar to $1.3 billion in 2025, according to Bloomberg estimates. If future legislation restricts or prohibits such incentives, fewer users may hold stablecoins on the platform, potentially impacting exchanges’ revenues.
The ultimate impact will depend on the exact wording of the bill. But lawmakers are likely to include specific rules regarding stablecoin rewards, according to people familiar with the discussions. This has become an important issue for debate between regulators and the crypto industry.
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Bhushan is a fintech enthusiast and has a great talent for understanding financial markets. His interest in economics and finance has drawn attention to the emerging blockchain technology and cryptocurrency market. He is in a continuous learning process and stays motivated by sharing the knowledge he has gained. In my free time, I like to read thriller novels and sometimes try my hand at cooking.
Bhushan Akolkar of X
