TLDR
- Coinbase criticizes a proposal by banking groups to ban stablecoin rewards linked to merchant payments.
- The banking coalition argues that rewards for stablecoin payments amount to indirect interest, which should be restricted under the GENIUS Act.
- Coinbase’s Faryar Shirzad insists that regulators should follow the plain text of the GENIUS Act without expanding its scope.
- The dispute centers on whether third-party rewards tied to stablecoins should be considered as interest under the GENIUS Act.
- Coinbase warns that banning stablecoin rewards could harm merchants and consumers by pushing them back to traditional card networks.
Crypto exchange Coinbase has strongly criticized a proposal by US banking groups urging regulators to ban rewards tied to stablecoin payments. The coalition claims that such rewards, including cashback and discounts, amount to “indirect interest.” Coinbase argues that this goes beyond the scope of the GENIUS Act, which bans stablecoin issuers from offering yield to token holders.
The banking lobby argues that rewards tied to stablecoin payments should be subject to the same restrictions. According to them, if the issuer has financial ties to the third parties offering rewards, those should be considered “indirect interest.” This interpretation could affect exchanges like Coinbase, which offer rewards programs linked to stablecoins.
In response, Coinbase’s chief policy officer Faryar Shirzad rejected this view. He insisted that regulators should adhere strictly to the text of the GENIUS Act. He emphasized that banks are attempting to control how Americans use their own money after a stablecoin is issued.
Coinbase Criticizes the Expansion of GENIUS Act Restrictions
Coinbase maintains that the current interpretation of the GENIUS Act should not extend to include third-party rewards programs. Shirzad warned that the banking coalition’s stance risks stifling innovation within the crypto space. He stated, “We must stick to the statutory text,” underscoring the importance of following the law as written.
Coinbase also expressed concern that a broader application of the GENIUS Act could harm consumers and merchants. If rewards programs tied to stablecoins are banned, it could push businesses and consumers back to traditional card networks, which come with higher fees. These high fees, totaling over $180 billion in 2024, benefit banks but hurt merchants.
The exchange argues that stablecoins could lower merchant payment costs. Coinbase claims that stablecoin payments offer a more cost-effective alternative to the current financial infrastructure. However, the banking lobby opposes any model that could erode bank deposits or challenge traditional payment systems.
Shirzad Remains Optimistic About Regulatory Decision
Despite the mounting pressure from the banking sector, Shirzad remains hopeful that regulators will not overreach. He believes regulators will interpret the law according to its original intent and reject any attempt to expand its scope.
Coinbase has repeatedly warned that expanding the GENIUS Act’s restrictions would set a dangerous precedent for the industry. Stablecoin issuers and exchanges, like Coinbase, should be able to offer rewards and incentives without undue regulatory interference.
At this stage, the dispute remains unresolved, with both sides continuing to argue their positions. However, Shirzad remains confident that the law will be enforced as written, without adding restrictions that could harm consumers or businesses.
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