The GENIUS Act banned issuer-paid yield, however the Senate markup battle is whether or not exchanges can maintain routing rewards round that restriction, and the reply might determine who controls $6 billion in annual incentives.
Senate Banking is scheduled to contemplate the CLARITY Act on Jan. 15, and the legislative battle 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 assist for CLARITY if the invoice’s language strikes past disclosure necessities to outright prohibit 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 Regulation 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 operate as cash, not deposit substitutes competing with regulated banks. However GENIUS left open the query of what occurs when platforms, exchanges, or associates supply rewards funded from their very own income or structured as loyalty incentives fairly 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 slender firewall or the beginning of a broader prohibition that extends to any entity within the distribution chain.
Definition battle that truly issues
Three archetypes of stablecoin rewards exist available in the market, and lawmakers are implicitly selecting which of them survive.
- The primary is issuer-paid yield, the place the stablecoin issuer shares reserve revenue immediately with holders. GENIUS was designed to dam this, and nobody disputes that restriction.
- The second is platform-funded loyalty, the place an change 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 buildings, associate preparations, or rigorously layered incentive packages that declare independence from the issuer.
The legislative knife-edge is whether or not CLARITY treats rewards as a disclosure-only concern or imposes substantive restrictions.
If the Senate textual content lands at disclosure-only, exchanges can plausibly maintain rewards alive as client 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 totally.
That distinction is precisely why the markup issues past the standard legislative theater.
Who’s lobbying for what
Banks need the affiliate and associate loophole closed. The American Bankers Affiliation and 52 state bankers’ associations explicitly urged Congress to make clear that the GENIUS prohibition ought to lengthen 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 immediately or not directly ought to fall inside the prohibition.
Their concern is structural: if platforms can supply rewards that operate 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 legislation 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 cut 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 development, with common USDC balances in Coinbase merchandise round $15 billion throughout that quarter.
Rewards language hits a fabric income line.
Why does this battle get tougher in 2026
Stablecoins are scaling quick sufficient that rewards turn into system-relevant fairly than a distinct segment product characteristic.
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 tasks that the overall stablecoin provide will attain roughly $420 billion by the tip of 2026, representing roughly 56% development 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 immediately into the scale of the rewards pool at stake.
A easy calculation reveals the magnitude. On the present provide of practically $309 billion, a 1.5% to 2.5% annual rewards charge 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 might attain $28.5 billion to $47.5 billion yearly.
These figures assume a reasonable reward charge, nicely beneath what some platforms presently supply, and mirror 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.
Normal Chartered estimated stablecoin adoption might 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 operate as quasi-savings automobiles fairly than pure transactional devices, which is precisely what occurs when platforms supply rewards that make holding balances enticing.
The macro backdrop explains why banks pushed for the affiliate and associate 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 look at 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 packages with transparency. Substantive restrictions would cap, situation, or outright prohibit these packages.
- Does the language apply solely to issuers or lengthen to affiliated platforms, companions, and intermediaries? That is the express ask from banks and the express objection from exchanges.
- Does the definition of “reward” seize pass-through reserve yield economics, or is it slender sufficient that exchanges can route round it by loyalty packages 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 might 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 transferring towards tighter perimeter controls, with monetary stability framing, treating stablecoin regulation as systemic fairly 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 legislation creates arbitrage alternatives or aligns with world requirements.
| Subject | Disclosure-only? | Substantive restriction? | Applies to associates/companions? | Routes-around potential? |
|---|---|---|---|---|
| 1) Disclosure vs restriction | Requires clear client disclosures for rewards (charge, supply of funds, circumstances, revocability) however doesn’t restrict providing rewards | Caps/circumstances/prohibits rewards (or creates “de facto ban” through eligibility, funding, or product-structure limits) | If sure, it may well turn 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 well-liked perimeter) | That is the core swap: specific extension = broad perimeter | Excessive if issuer-only (platform-funded rewards proceed); low if associates/companions included (routing collapses into compliance threat) |
| 3) Broad vs slender “reward” definition (captures pass-through yield?) | Slim definition (e.g., “curiosity paid by issuer”) + disclosures → doubtless 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 slender (loyalty, rebates, factors, price credit); medium if broad however enforcement gentle; low if broad + clear anti-evasion language |
| 4) Enforcement path (rulemaking / companies) | Heavy reliance on company guidelines/steerage to specify disclosures, scope, and anti-evasion | Statute hard-codes prohibitions/circumstances; companies primarily implement | If enforcement delegates to companies, companions/associates scope might broaden through interpretation even when statute is ambiguous | Greater 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 stage. CLARITY decides whether or not that precept extends to your entire 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 instrument 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 assist indicators that the business sees this as a line price defending, not only a negotiating place. The corporate’s $355 million quarterly stablecoin income and emphasis on rewards as a development driver clarify that proscribing platform incentives modifications the enterprise mannequin, not simply the disclosure burden.
Banks’ equally agency push to shut the affiliate loophole reveals they view platform rewards because the mechanism that turns GENIUS’ issuer ban right into a workaround fairly than an answer.
The markup will reveal which concept of stablecoin regulation prevails: slender issuer restrictions that protect platform competitors, or broad prohibitions that deal with any yield-adjacent incentive as a menace to deposit stability.
That alternative 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 take a look at whether or not that coalition can survive the specifics of what these guidelines really say.
