Citi and Coinbase’s 3.75% Stablecoin Reward Triggers Backlash Amid Clarity Act Failure

Citigroup is working with Coinbase. The goal is pretty straightforward: let big corporate clients collect stablecoin payments without ever touching crypto themselves. It’s a clean workaround — and it’s landing right in the middle of a messy regulatory fight.

Here’s how the plumbing works. A customer pays a Citi client using stablecoins. Coinbase then converts those digital tokens into US dollars. Citi picks it up from there and processes the funds like any normal bank transfer. Merchants never hold crypto. They never see crypto. They basically just get dollars, same as always — except the payment rails underneath are running on stablecoin infrastructure. And going the other direction, Coinbase’s payment customers can get a Citi product that flips incoming cash into stablecoins, which then sit at Coinbase earning a 3.75% annual reward. That reward feature is where things get complicated.

Not everyone’s happy about it.

Senate Vote, Banking Lobbies, and a Contradiction

The Clarity Act — the bill meant to build out a proper rulebook for US crypto markets — went down in the Senate on September 15. The vote was 49 to 50. Close, but not close enough. The bill needed 60 votes to clear the procedural hurdle, and it didn’t get there. One of the sharpest fights inside that debate was over stablecoin rewards. Banking groups came out hard against them, arguing that rewards attached to stablecoins would pull deposits away from traditional banks, shrink credit availability, and gut the kind of community lending that local banks depend on.

The Financial Services Forum was among the loudest voices pushing Congress to ban stablecoin rewards outright. That’s notable because the Financial Services Forum is led by Citi CEO Jane Fraser. So Citi’s own chief was part of a coalition lobbying to kill the exact kind of reward product that Citi is now helping Coinbase offer its customers. That’s a tension worth sitting with.

Shahmir Khaliq, Citi’s head of services, said the Senate vote doesn’t really change what Citi can do. Per Khaliq, Citi operates under its existing banking license and existing regulations — and that framework is what governs the partnership, not whatever Washington did or didn’t pass.

It’s a fair legal point. But it doesn’t make the contradiction disappear.

See also: Federal Reserve Seeks Public Input on Stablecoin Rules After GENIUS Act Deadline Missed

No Launch Date, No Merchant Names Yet

Citi hasn’t said which merchants are actually using this service. No names, no sectors, no geography. There’s also no specific launch date on the table. That’s a lot of unknowns for something being positioned as a meaningful step forward. It’s unclear whether the delay is regulatory caution, technical prep, or just standard corporate slowness before a rollout. Probably some mix of all three.

What Citi has made clear is that the stablecoin payments work is part of something bigger. The bank is also expanding its private blockchain for corporate cash transactions — and that expansion is heading to Japan and the United Arab Emirates. So while the Coinbase partnership handles the consumer-facing stablecoin angle, the blockchain push into new markets is more about moving corporate money faster across borders. Two different products, but both pointing in the same direction: Citi wants digital asset infrastructure woven into its core banking operations.

The Japan and UAE expansion is worth watching on its own. Both markets have been active in digital asset policy, and large multinationals operating in those regions have real demand for faster, cheaper cross-border settlement. Citi’s private blockchain, if it scales well, could give corporate treasurers a tool that actually competes with the speed of crypto rails without the volatility.

What the Coinbase Side Gets

For Coinbase, the Citi deal is a distribution win. Getting a product in front of Citi’s large corporate client base is not something Coinbase could easily replicate on its own. The 3.75% annual reward attached to the stablecoin product gives Coinbase something genuinely competitive to offer — especially when traditional savings rates have been a moving target. Whether that reward survives future regulation is another question entirely. Banking lobbies didn’t get what they wanted in the Clarity Act vote, but they’ll be back. The 49-50 result was close enough that another push is probably coming.

Read also: Coinbase Opens IPO Access to Retail Investors with Oura Offering Amid Polymarket Fraud

And Citi will be in an awkward spot if it happens. The Financial Services Forum hasn’t changed its position. Jane Fraser hasn’t publicly walked back the lobby effort. But Citi is now a distribution partner for the very product the Forum wanted banned.

No merchants named. No launch date confirmed. The 3.75% reward sits at Coinbase, the Senate vote failed 49-50, and Citi’s blockchain is heading to Japan and the UAE.