Coinbase CEO Brian Armstrong is pushing back against banks’ calls for tighter restrictions on stablecoin rewards, arguing that rewards paid on USDC balances are fundamentally different from interest on bank deposits. In a September 18 interview with Money Rehab, Armstrong said Coinbase is passing along part of the economic upside generated by assets backing stablecoins, including short-term U.S. Treasuries.
Armstrong emphasized that Coinbase is not a stablecoin issuer—USDC is issued by Circle—and said the company does not engage in fractional-reserve lending. Under the GENIUS Act, stablecoin issuers must maintain reserves at least equal to outstanding stablecoins, while the law prohibits issuers from paying interest or yield directly to holders. The remaining regulatory dispute concerns whether exchanges and other third parties should also be restricted from providing rewards linked to stablecoin balances.
The issue has become a major point of contention between crypto companies and the banking sector. Banking groups have argued that stablecoin rewards could encourage consumers to move money away from traditional deposits, potentially affecting bank funding and lending. Armstrong, by contrast, said some large banks are primarily concerned about competition from stablecoins. The White House Council of Economic Advisers estimated that extending the yield prohibition could increase bank lending by about $2.1 billion while creating an estimated $800 million annual welfare cost, although banking groups have challenged assumptions behind the analysis.
The dispute is also closely tied to the failed CLARITY Act. Coinbase had previously objected to provisions affecting stablecoin rewards, but Armstrong said later revisions addressed the company’s concerns. The Senate nevertheless failed to advance the legislation in a September 15 procedural vote, leaving the broader regulatory question unresolved.
For Coinbase, the outcome leaves stablecoin rewards as an important part of its digital-dollar strategy while the legislative framework remains unsettled. The debate now extends beyond crypto regulation into a broader question over whether stablecoins and traditional bank deposits should operate under comparable rules when they compete for consumers’ dollars.
