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On November 14, 2025, Coinbase, a leading cryptocurrency exchange, criticized major U.S. banking associations for their attempts to influence federal regulators to prohibit merchant rewards linked to stablecoin payments. These rewards include incentives like cashbacks and discounts, which banks argue constitute “indirect interest.”
The controversy has arisen amid the implementation of the GENIUS Act, a law enacted in July 2025, which prohibits stablecoin issuers from offering interest or yield to token holders. Banking groups are now advocating for a broader interpretation of this law to extend the prohibition to third-party benefits associated with stablecoin transactions.
Faryar Shirzad, Coinbase’s Chief Policy Officer, publicly decried this move as an “unamerican” overreach. Through a post on social media platform X, Shirzad warned that such a reinterpretation could stifle competition and restrict consumer freedoms. According to Shirzad, the proposal represents an attempt by banks to maintain their dominance over the payment system by limiting the usage and benefits of stablecoins, which provide an alternative to traditional banking fees.
The Coinbase Institute, the policy research division of Coinbase, argues that the banking sector’s interpretation of the GENIUS Act goes beyond what Congress intended. The Act specifically targets stablecoin issuers regarding interest payments, without extending to merchants, employers, fintech companies, or property owners who may provide benefits indirectly linked to stablecoin use. Coinbase maintains that regulators have the authority to monitor issuers but should not infringe upon the decisions of independent businesses and individuals.
The banking lobby’s proposal could have far-reaching impacts if adopted. Common business practices, such as offering merchant discounts for stablecoin payments or employer-funded payroll benefits, could be deemed illegal merely because the businesses use an issuer’s API or maintain a basic relationship with them. Such restrictions could inhibit innovation and reduce competition, ultimately maintaining high transaction fees that benefit traditional financial institutions.
Coinbase emphasizes that U.S. merchants incurred over $180 billion in card fees last year. By adopting the banks’ approach, it is feared that stablecoin adoption might slow, preserving the existing fee-heavy structure and hindering the development of cost-reducing innovations for consumers and businesses alike.
In a broader economic context, stablecoins have shown significant potential for growth. U.S. Treasury Secretary Scott Bessent recently projected that the stablecoin market, currently valued at approximately $315 billion, could increase tenfold by 2030. This expansion is anticipated largely due to the GENIUS Act, which positions stablecoins as a potential key element in federal financing strategies.
Stablecoins, a type of cryptocurrency designed to maintain a stable value by pegging to a reserve of assets, have been gaining traction due to their potential to facilitate efficient and low-cost transactions. Their adoption could transform payments systems and financial transactions, offering alternatives to traditional banking fees. As digital currencies increasingly become integral to financial ecosystems, the debate around their regulation and use is becoming more significant.
However, there are risks and counterpoints to consider. Critics argue that while stablecoins offer potential benefits, they also pose certain risks, such as regulatory challenges and the need for robust oversight to prevent misuse. Moreover, any rapid expansion of the stablecoin market could pose systemic risks if not carefully managed, particularly if stablecoins were to integrate deeply with traditional financial systems without adequate safeguards in place.
The ongoing debate highlights the tensions between traditional banking institutions and emerging financial technologies. Coinbase’s stance suggests a push towards more open and competitive financial systems, while banking associations appear focused on preserving established structures. The outcome of this regulatory dispute could significantly impact the future growth and adoption of stablecoins, shaping how consumers and merchants engage with digital currencies.
In conclusion, as the landscape of global finance evolves with the advent of digital currencies like stablecoins, regulators, businesses, and consumers must navigate complex challenges and opportunities. The current clash between Coinbase and banking lobbyists underscores the broader dialogue about innovation, regulation, and the future of money. As the debate continues, the world will be watching how these dynamics unfold and what they mean for the financial systems of tomorrow.
