Coinbase, Banks Clash Over Stablecoin Interest Rules

The US Department of the Treasury finds itself at the center of a regulatory tug-of-war as it navigates implementation of the GENIUS Act, the legislation governing stablecoin payments in the United States. Crypto companies and traditional banking institutions have presented fundamentally opposing recommendations regarding how the Treasury should interpret and enforce provisions related to stablecoin interest payments. This conflict represents a critical moment in the ongoing integration of digital assets into the mainstream financial system.

At the heart of the debate lies the question of scope: how broadly should restrictions on stablecoin interest payments apply? The GENIUS Act itself provides the framework, but the Treasury’s forthcoming guidance will determine whether stablecoin interest becomes a standard feature of crypto financial services or faces near-total prohibition. The outcome will significantly impact how millions of Americans interact with digital currencies and could set precedents for future crypto regulation.

Coinbase has taken a clear position in this regulatory debate, formally urging the Treasury to limit any ban on stablecoin interest payments exclusively to stablecoin issuers. In a letter submitted on Tuesday, the crypto exchange argued that this targeted approach aligns with Congress’s original intent when passing the GENIUS Act legislation. The company’s proposal would create a regulatory distinction between entities that create and manage stablecoins versus those that simply facilitate their trading and use.

Under Coinbase’s interpretation, crypto exchanges and other non-issuer platforms would retain the ability to offer interest on stablecoin holdings, maintaining a feature that has become central to many crypto investment strategies. The company contends that this distinction preserves innovation and consumer choice while still addressing regulatory concerns about systemic risk. This position reflects the crypto industry’s broader push for regulatory clarity that doesn’t stifle technological advancement.

Traditional financial institutions, led by the Bank Policy Institute (BPI), have taken the opposite stance, advocating for a blanket ban on all stablecoin interest payments. These banking groups argue that the prohibition should extend beyond stablecoin issuers to include non-issuers such as crypto exchanges and other platforms. Their position represents a more conservative approach to crypto regulation that prioritizes financial stability and consumer protection.

The banking industry’s push for comprehensive restrictions reflects concerns about regulatory arbitrage and potential systemic risks. By advocating for a blanket ban, traditional financial institutions aim to create a level playing field and prevent what they might view as unfair competition from less-regulated crypto platforms. The BPI and its allies appear concerned that allowing stablecoin interest payments outside traditional banking channels could create shadow banking systems with different regulatory standards.

This regulatory standoff extends beyond the immediate question of stablecoin interest payments to touch on fundamental questions about how digital assets should be integrated into the existing financial framework. The Treasury’s decision will signal whether regulators view crypto platforms as distinct entities requiring tailored rules or whether they should be subject to the same restrictions as traditional financial institutions.

The outcome of this debate will have significant implications for the future of stablecoin adoption and the broader crypto ecosystem. A decision favoring Coinbase’s position could preserve important revenue streams for crypto exchanges and maintain features that attract users to digital asset platforms. Conversely, adoption of the banking industry’s blanket ban approach could fundamentally reshape how stablecoins are used and valued within the crypto economy.

As the Treasury weighs these competing perspectives, it must balance Congressional intent with practical regulatory considerations. The agency’s final guidance will not only determine the immediate fate of stablecoin interest payments but will also establish important precedents for how future crypto-related legislation is interpreted and implemented. This decision represents a critical inflection point in the ongoing evolution of digital asset regulation in the United States.