Coinbase May Withdraw Support for US crypto bill if Stablecoin Rewards Are Restricted
Coinbase has warned lawmakers it may withdraw support for forthcoming US crypto market legislation if the bill imposes limits on stablecoin rewards beyond disclosure requirements. The exchange insists any provisions should require transparency rather than bans or restrictions that reserve rewards for licensed banks or chartered institutions. Banks argue restricting rewards to licensed entities is needed to prevent deposit flight from traditional banks; crypto firms counter that such limits would stifle competition and reverse elements of the GENIUS Act passed in July, which allows third-party partners to offer rewards. Coinbase and Circle split interest on USDC holdings; Coinbase currently offers about 3.5% on some USDC balances and could face up to an estimated $1.3 billion hit to stablecoin-related revenue in 2025 if rewards are blocked. The dispute has weakened bipartisan support for the market-structure bill, reducing the odds of passage in early 2026. Lawmakers may consider a compromise limiting rewards to entities with banking licenses or national trust charters; five crypto firms recently received preliminary OCC trust approvals. The outcome will influence stablecoin custody flows, exchange revenues, and competition between banks and crypto platforms.
Neutral
The news is neutral overall because it creates both downside and upside pressures: downside from potential revenue loss and uncertainty for Coinbase and other exchanges if stablecoin rewards are restricted; upside from regulatory clarity if a compromise is reached that legitimises certain products under banking charters. Short-term market reaction could be mildly negative for exchange tokens and stablecoin-related flows due to uncertainty and headlines about losing a major policy backer. Traders may see temporary volatility in assets tied to exchange revenue (exchange tokens, some stablecoin liquidity measures). Over the medium to long term, outcomes diverge: a strict restriction (rewards limited to banks) would be bearish for exchanges’ revenue models and could shift liquidity into traditional banks, reducing on-chain stablecoin deposits; this could pressure exchange valuations and services tied to USDC. Conversely, a transparency-focused compromise would preserve exchange business models and keep competition intact, supporting crypto sector fundamentals. Historical parallels: prior regulatory threats (e.g., US custody/ETF decisions, staking restrictions talk) have produced short-term sell-offs followed by recovery once clarity or compromise emerged. Key variables traders should watch: Senate markup language, final bill text on rewards, OCC trust charter approvals, and Coinbase/Circle stablecoin flow metrics. Positioning advice: prefer short-duration trades around legislative milestones, hedge exposure to exchange-native tokens, and monitor on-chain stablecoin balances for liquidity shifts.