At the center of the tension is a single issue that has grown into a deal-breaker: whether crypto platforms should be allowed to reward users for holding stablecoins.

As senators prepare to review the new market structure proposal, people familiar with the discussions say Coinbase has warned it may pull its backing if the bill includes strict limits on stablecoin rewards. The exchange is pushing for a light-touch approach that emphasizes transparency rather than restrictions that could effectively shut crypto platforms out of offering incentives.

Some draft ideas circulating on Capitol Hill would reserve stablecoin rewards for licensed financial institutions, a move widely supported by banks. Crypto firms argue this would tilt the playing field, locking innovation behind traditional banking licenses and freezing out non-bank platforms.

Why rewards are a red line for Coinbase

Stablecoin rewards are not just a product feature for Coinbase – they are deeply tied to its business model. The company earns a share of interest generated from reserves backing USDC, issued by Circle Internet Group, in which Coinbase also holds an ownership stake.

By offering rewards on USDC balances, Coinbase encourages users to keep funds parked on its platform, creating a steady income stream that helps offset slowdowns in trading activity. Industry estimates suggest this revenue has become one of the exchange’s most dependable sources of income, making any regulatory disruption especially painful.

Banks versus crypto platforms

Traditional lenders have been vocal in their opposition. Banking groups argue that stablecoin rewards function like interest-bearing accounts without the safeguards required of banks, potentially siphoning deposits away from local lenders. The American Bankers Association has warned that large-scale deposit migration could weaken community lending and harm small businesses, farmers, and homebuyers.

Crypto companies counter that these concerns exaggerate the risk and ignore the role stablecoins play in modern payments and settlement. From their perspective, forcing rewards into the banking system would reduce competition rather than protect consumers.

Political pressure behind the scenes

Coinbase’s stance carries real weight in Washington. The crypto industry emerged as one of the biggest political spenders in recent election cycles, and Coinbase has been a central player. Led by CEO Brian Armstrong, the company has supported initiatives tied to President Donald Trump, whose second term has already delivered major wins for digital asset firms.

One of those wins was the passage of the GENIUS Act, which established national rules for stablecoin issuers. While the law bars issuers themselves from paying yield, it explicitly left room for third parties, such as exchanges, to offer customer rewards – a compromise now being challenged in the new bill.

A fragile consensus at risk

Lawmakers initially hoped the broader crypto market bill would move quickly with bipartisan support. Instead, the dispute over rewards has reopened old divisions. Analysts say that if consensus breaks during committee negotiations, the bill could stall indefinitely, pushing meaningful crypto legislation further into the future.

For Coinbase, the message is clear: limiting stablecoin rewards is not a minor adjustment but a structural threat. Whether lawmakers soften the language or press ahead may determine not only Coinbase’s support, but also the fate of the entire bill.

The information provided in this article is for educational purposes only and does not constitute financial, investment, or trading advice. Coindoo.com does not endorse or recommend any specific investment strategy or cryptocurrency. Always conduct your own research and consult with a licensed financial advisor before making any investment decisions.

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Filed under: Bitcoin - @ January 12, 2026 6:16 am