The GENIUS Act banned issuer-paid yield, however the Senate markup struggle is whether or not exchanges can preserve routing rewards round that restriction, and the reply may resolve who controls $6 billion in annual incentives.
Senate Banking is scheduled to contemplate the CLARITY Act on Jan. 15, and the legislative struggle has narrowed to a single query with billion-dollar penalties: what counts as a stablecoin “reward,” and who’s allowed to pay it?
Bloomberg reported that Coinbase might rethink its help for CLARITY if the invoice’s language strikes past disclosure necessities to outright limit rewards, a sign that the business’s pro-crypto coalition is testing its personal limits as regulatory textual content will get extra particular.
The backdrop is easy. GENIUS, now Public Legislation 119-27, established a cost stablecoin framework and included an issuer-level prohibition: permitted stablecoin issuers can not pay holders curiosity or yield solely for holding, utilizing, or retaining the stablecoin.
The logic was clear, as cost stablecoins ought to perform as cash, not deposit substitutes competing with regulated banks. However GENIUS left open the query of what occurs when platforms, exchanges, or associates provide rewards funded from their very own income or structured as loyalty incentives slightly than direct yield pass-throughs.
CLARITY is the place that enforcement perimeter will get outlined, and the markup will reveal whether or not Congress treats the issuer ban as a slim firewall or the beginning of a broader prohibition that extends to any entity within the distribution chain.
Definition struggle that truly issues
Three archetypes of stablecoin rewards exist out there, and lawmakers are implicitly selecting which of them survive.
- The primary is issuer-paid yield, the place the stablecoin issuer shares reserve revenue instantly with holders. GENIUS was designed to dam this, and nobody disputes that restriction.
- The second is platform-funded loyalty, the place an alternate or pockets pays rewards from its personal margin or advertising funds to drive adoption or retain balances.
- The third is pass-through T-bill economics, the place product design successfully routes reserve yield to customers by affiliate constructions, companion preparations, or rigorously layered incentive applications that declare independence from the issuer.
The legislative knife-edge is whether or not CLARITY treats rewards as a disclosure-only difficulty or imposes substantive restrictions.
If the Senate textual content lands at disclosure-only, exchanges can plausibly preserve rewards alive as shopper incentives, disclosed however unrestricted.
If the language tightens into limits, caps, or circumstances, then the economics of USDC distribution and on-platform stablecoin balances change solely.
That distinction is strictly why the markup issues past the same old legislative theater.
Who’s lobbying for what
Banks need the affiliate and companion loophole closed. The American Bankers Affiliation and 52 state bankers’ associations explicitly urged Congress to make clear that the GENIUS prohibition ought to prolong to companions and associates, warning of deposit disintermediation and yield-like incentives that bypass the issuer ban.
Financial institution-aligned commenters responding to Treasury’s GENIUS implementation discover went additional, arguing that advantages supplied instantly or not directly ought to fall throughout the prohibition.
Their concern is structural: if platforms can provide rewards that perform economically like yield, the issuer ban turns into theater whereas the true competitors for deposits occurs one layer eliminated.
The crypto business argues that Congress intentionally distinguished between issuer-paid yield and platform rewards.
The Blockchain Affiliation-led coalition argues that the regulation bans issuer-paid yield whereas preserving the power of platforms and third events to supply lawful rewards and incentives.
They warn that increasing the ban would scale back competitors, inject uncertainty early in implementation, and penalize exchanges for utilizing their very own capital to drive adoption.
Coinbase’s financial publicity makes this greater than posturing. The corporate reported $355 million in stablecoin income within the third quarter of 2025 and described rewards as a driver of USDC progress, with common USDC balances in Coinbase merchandise round $15 billion throughout that quarter.
Rewards language hits a fabric income line.
Why does this struggle get more durable in 2026
Stablecoins are scaling quick sufficient that rewards develop into system-relevant slightly than a distinct segment product function.
Stablecoins registered $33 trillion in transaction quantity in 2025, up 72% year-over-year, with USDC and Tether accounting for almost all of flows.
Bernstein initiatives that the whole stablecoin provide will attain roughly $420 billion by the tip of 2026, representing roughly 56% progress from present ranges. Citi’s longer-run forecast places stablecoin issuance at $1.9 trillion in a base case and $4 trillion in a bull case by 2030.
These numbers matter as a result of they translate instantly into the dimensions of the rewards pool at stake.
A easy calculation exhibits the magnitude. On the present provide of practically $309 billion, a 1.5% to 2.5% annual rewards fee implies annual incentives of $4.6 billion to $7.7 billion.
If provide reaches Bernstein’s 2026 forecast of $420 billion, that pool grows to $6.3 billion to $10.5 billion. By 2030, underneath Citi’s base case, it may attain $28.5 billion to $47.5 billion yearly.
These figures assume a reasonable reward fee, nicely under what some platforms at the moment provide, and replicate the financial battlefield the place banks, exchanges, and issuers compete for buyer balances and cost flows.
Banks are treating this as a deposit warfare as a result of the numbers justify that framing.
Customary Chartered estimated stablecoin adoption may pull $1 trillion from emerging-market financial institution deposits over roughly three years, with financial savings utilization rising materially by 2028.
That projection assumes stablecoins proceed to perform as quasi-savings automobiles slightly than pure transactional devices, which is strictly what occurs when platforms provide rewards that make holding balances enticing.
The macro backdrop explains why banks pushed for the affiliate and companion perimeter of their congressional feedback, they see rewards because the mechanism that turns cost stablecoins into deposit substitutes no matter what the issuer does.
What to observe at markup
4 questions will decide whether or not the coalition holds or fractures.
- Does CLARITY deal with rewards as disclosure-only or impose substantive restrictions? Disclosure necessities depart room for platforms to proceed rewards applications with transparency. Substantive restrictions would cap, situation, or outright prohibit these applications.
- Does the language apply solely to issuers or prolong to affiliated platforms, companions, and intermediaries? That is the specific ask from banks and the specific objection from exchanges.
- Does the definition of “reward” seize pass-through reserve yield economics, or is it slim sufficient that exchanges can route round it by loyalty applications and advertising spend? The Treasury discover remark letters make this the true definitional battleground: whether or not “solely” turns into a loophole or a transparent line.
- What does enforcement appear to be in observe? Even when markup advances CLARITY, implementation requires rulemakings, company resourcing, and coordination between Treasury, the Federal Reserve, and prudential regulators.
The January markup is a gap transfer, not a end line, and the regulatory perimeter may shift as companies interpret the statute and reply to business structuring.
The Financial institution for Worldwide Settlements has already catalogued how regulators globally method stablecoin yields and rewards, together with prohibitions on no-interest or yield preparations and the coverage logic that distinguishes cost devices from funding merchandise.
The European Union and the UK are shifting towards tighter perimeter controls, with monetary stability framing, treating stablecoin regulation as systemic slightly than experimental.
That worldwide context issues as a result of it units the baseline for what counts as a reputable cost stablecoin framework, and whether or not the US regulation creates arbitrage alternatives or aligns with international requirements.
| Situation | Disclosure-only? | Substantive restriction? | Applies to associates/companions? | Routes-around doable? |
|---|---|---|---|---|
| 1) Disclosure vs restriction | Requires clear shopper disclosures for rewards (fee, supply of funds, circumstances, revocability) however doesn’t restrict providing rewards | Caps/circumstances/prohibits rewards (or creates “de facto ban” by way of eligibility, funding, or product-structure limits) | If sure, it will possibly develop into a backdoor restriction even when framed as disclosure | Excessive underneath disclosure-only (exchanges can rebrand as loyalty/advertising); low–medium if restrictions outline rewards broadly |
| 2) Issuer-only vs associates/companions | Retains GENIUS’ issuer-level “no yield” as the primary line; platform rewards stay allowed | Extends restrictions to platforms, intermediaries, associates, companions (banks’ most popular perimeter) | That is the core swap: express extension = broad perimeter | Excessive if issuer-only (platform-funded rewards proceed); low if associates/companions included (routing collapses into compliance threat) |
| 3) Broad vs slim “reward” definition (captures pass-through yield?) | Slim definition (e.g., “curiosity paid by issuer”) + disclosures → probably leaves room for “loyalty” framing | Broad definition that captures direct or oblique financial advantages tied to holding/utilizing/retaining stablecoins (together with coordinated funding / pass-through economics) | If associates/companions are included, a broad definition is what prevents “one-layer-removed” incentives | Excessive if slim (loyalty, rebates, factors, price credit); medium if broad however enforcement mild; low if broad + clear anti-evasion language |
| 4) Enforcement path (rulemaking / companies) | Heavy reliance on company guidelines/steering to specify disclosures, scope, and anti-evasion | Statute hard-codes prohibitions/circumstances; companies primarily implement | If enforcement delegates to companies, companions/associates scope might increase by way of interpretation even when statute is ambiguous | Larger when guidelines lag or definitions are imprecise; decrease when statute defines “reward” + anti-evasion clearly and companies coordinate |
Actual stakes
GENIUS established the precept that cost stablecoins should not pay yield on the issuer degree. CLARITY decides whether or not that precept extends to the complete distribution chain or is proscribed to the entities holding reserves.
If the Senate textual content restricts platform rewards substantively or expands the prohibition to associates, exchanges lose a main device for driving adoption and retaining balances. If the textual content stops at disclosure, the issuer ban turns into a compliance checkpoint whereas the true financial competitors continues on the platform layer.
Coinbase’s reported willingness to rethink help indicators that the business sees this as a line value defending, not only a negotiating place. The corporate’s $355 million quarterly stablecoin income and emphasis on rewards as a progress driver clarify that limiting platform incentives adjustments the enterprise mannequin, not simply the disclosure burden.
Banks’ equally agency push to shut the affiliate loophole exhibits they view platform rewards because the mechanism that turns GENIUS’ issuer ban right into a workaround slightly than an answer.
The markup will reveal which concept of stablecoin regulation prevails: slim issuer restrictions that protect platform competitors, or broad prohibitions that deal with any yield-adjacent incentive as a menace to deposit stability.
That selection determines who controls the $6 billion to $10 billion in annual rewards projected for 2026, and whether or not GENIUS’ “cost stablecoin” framing holds in observe or turns into a label that obscures financial actuality.
The coalition supporting crypto regulation was constructed on the premise that clear guidelines allow innovation. CLARITY’s rewards language will check whether or not that coalition can survive the specifics of what these guidelines really say.
