Crypto exchange Coinbase has slammed US banking groups for asking regulators to ban merchant rewards, cashbacks and discounts offered to customers who pay with stablecoins, calling the request “unamerican.”

The clash relates to the statutory language of the GENIUS Act, which prohibits stablecoin issuers from offering interest or yield to holders of the token, but it does not explicitly extend the ban to crypto exchanges or affiliated businesses.

The banking groups claim an “indirect interest” arises when a third-party financially benefits and has a connection to the stablecoin issuer. Coinbase chief policy officer Faryar Shirzad, however, strongly opposed that view in a post to X on Thursday and called on regulators to “stick to the statutory text.”

“There is something unamerican about bank lobbyists pressing regulators to tell stablecoin customers what they can and cannot do with their own money after it is issued.”

The banking groups are seemingly concerned that widespread adoption of yield-bearing stablecoins could undermine the banking system, which relies on banks attracting deposits with high-interest savings products to back the loans they make.

Coinbase, Banks
Source: Faryar Shirzad

Stablecoins expected to draw blood from banking

Widespread stablecoin adoption could result in more than $6.6 trillion in deposit outflows from the traditional banking system, according to an estimate by the US Treasury Department in April.

Coinbase argued stablecoins could slash the more than $180 billion in card fees that US merchants paid in 2024; however, “big banks” continue to stand in the way and prevent stablecoin innovations from challenging the traditional payments system.

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“If third parties are prevented from providing these benefits, consumers are less likely to see stablecoins as a viable payment alternative, and merchants will continue paying hefty fees.”

Centralized exchanges benefit when stablecoin trading soars

Companies like Coinbase benefit from stablecoin adoption, as they earn fees from increased trading volume on their exchange.

Many crypto exchanges issue credit cards to incentivize merchant spending with cashback and crypto rewards — an offering Shirzad fears is under threat but remains optimistic that “common sense will prevail.”

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