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Coinbase has challenged US banking groups after they urged regulators to block merchant rewards, cashbacks, and discounts for stablecoin payments. The company says the GENIUS Act bans yield from issuers but does not stop exchanges or merchants. Banks argue stablecoin rewards could reshape deposits and payment revenue. Coinbase says customers should choose how to use their money.
Banking groups argue that merchant rewards linked to stablecoins create what they call “indirect interest.” They say this happens when a third party gains a financial benefit connected to a stablecoin issuer. They want regulators to treat these programs as violations of the GENIUS Act.
They also say stablecoin rewards could weaken traditional credit card systems. Banks rely on transaction fees, and they fear losing significant revenue if stablecoin payments grow across merchant networks.
In addition, banks depend on deposits to support loans. They warned that widespread stablecoin use could push customers away from traditional savings products. A US Treasury estimate in April projected $6.6 trillion in possible deposit outflows if stablecoins reached broad adoption.
Coinbase chief policy officer Faryar Shirzad rejected the idea of “indirect interest.” He said the GENIUS Act only restricts issuers and does not apply to exchanges or merchants. He urged regulators to “stick to the statutory text” and avoid limiting consumer options.
He said it was “un-American” for lobbyists to pressure regulators to restrict how customers use their money. Coinbase noted that payment rewards make transactions faster and cheaper. They also say these programs help more people access digital payments.
At the same time, Coinbase argued that stablecoins could reduce the more than $180 billion in card fees paid by US merchants in 2024. The company claims large banks stand in the way of innovation by resisting changes that could challenge their payment networks.
This raises a central question for the industry: Should regulators decide how customers earn rewards when using stablecoins for payments?
Regulators continue to evaluate stablecoins as their use grows across consumer and merchant payments. They are reviewing transparency, reserves, and consumer safeguards. They also watch how rewards programs shape the shift toward digital payment options.
Meanwhile, businesses are testing crypto-based rewards for online sales. Many companies see these tools as a path toward wider adoption of digital currencies. Supporters say stablecoin incentives help these assets fit into everyday spending habits.
Crypto exchanges also rely on stablecoin activity for revenue. Higher usage often results in more trading, which increases fees on these platforms. Many exchanges now issue cards that offer cashback or crypto rewards for merchant spending.
Coinbase worries these card programs may face restrictions if bank groups succeed. Still, Shirzad remains hopeful that what he calls “common sense” will guide the final rules. He says customers should remain free to choose their preferred payment tools.
The dispute between Coinbase and US banking groups centers on whether stablecoin rewards should continue as regulators examine payment rules. Banks warn about deposit and revenue risks, while Coinbase argues for consumer choice and innovation. The outcome may influence how stablecoins integrate into everyday payments and business activity.
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