Coinbase Slams Banks For Trying To Ban Stablecoin Rewards

What Happened

This new response comes as Coinbase recently launched a 3.75% AER savings account for UK users through ClearBank, offering FSCS protection of up to £85,000, effective November 11.

The launch coincides with the Bank of England proposing a £20,000 cap on individual stablecoin holdings.

Market Context

The associations warned that community banks face particular vulnerability to deposit outflows, citing analysis showing disintermediation could eliminate approximately $1.5 trillion in lending capacity and shrink small business and farm credit by $110 billion and $62 billion, respectively.

The exchange warned that broad interest bans would hurt consumers by eliminating market-based incentives that lower payment costs and spur merchant acceptance.

Notably, Shirzad also published a Telegraph commentary criticizing the Bank’s excessive caution, arguing these constraints risk “deterring adoption and innovation, making GBP stablecoins unusable for wholesale markets, and undermining the UK’s global competitiveness.“

Why It Matters

“Congress was clear that the GENIUS Act only prohibits interest/yield paid by the issuer, and nothing else,” Shirzad stated on X, warning that expanding the ban to third-party benefits would create “unprecedented, far-reaching and unpredictable” implications.

Coinbase Institute’s argument shows an analysis that U.S. merchants paid over $180 billion in card fees in 2024, costs that stablecoins could help reduce.

Coinbase cited scenarios where small businesses offering discounts for stablecoin payments could face prohibition if they maintain any relationship with issuers, even routine API integrations.

Details

Coinbase has mounted a fierce defense of stablecoin reward programs, accusing banking associations of attempting to expand Congress’s interest prohibition beyond its statutory limits illegally.

The crypto exchange’s 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 banking associations are misinterpreting congressional intent by claiming merchant rewards tied to stablecoin payments constitute illegal interest.

Banking Groups Push Expansive Interest Ban

The American Bankers Association and 52 state banking associations submitted letters to the Treasury urging strict implementation of the GENIUS Act’s interest prohibition.

Their November 4 filing proposes defining “interest or yield” broadly to encompass any economic benefit, preventing evasion through affiliates, and treating indirect payments as if they were issuer payments.

Brooke Ybarra, ABA’s senior vice president of innovation and strategy, told the organization’s annual convention that “a detriment would be allowing Coinbase or Kraken to pay interest on payment stablecoins.”

Jess Sharp, ABA senior vice president, acknowledged the challenge ahead.

“This is not an easy fight, it’s 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 fewer deposits means fewer loans.”

Coinbase Argues Consumer Harm

The company’s November 4 Treasury submission emphasized that the GENIUS Act prohibits only permitted payment stablecoin issuers from paying interest “solely in connection with the holding, use, or retention” of stablecoins.

“The statute addresses payments by issuers only—nowhere does the text reference ‘indirect’ interest, affiliates, or third-party benefits,” Coinbase wrote, adding that “treating third-party rewards or loyalty programs as prohibited interest would rewrite Congress’s carefully-drawn lines.”

UK Expansion Amid Similar Regulatory Pressure

The move positions the exchange to compete with traditional British banks, where major institutions like HSBC and NatWest pay between 1.15% and 3.5%.

Keith Grose, CEO of Coinbase UK, framed the offering as building “the UK’s number 1 financial app.“

Coinbase vice president Tom Duff Gordon called the restrictions “bad for UK savers, bad for the City and bad for sterling.”