Coinbase's Stablecoin Rewards Under Senate Scrutiny

Coinbase, the leading crypto exchange in the United States, is keeping a close eye on a significant crypto bill making its way through the Senate. The main point of contention is whether crypto platforms should be permitted to offer rewards on stablecoin holdings. Coinbase sees these rewards as a vital part of its business model and is worried that new restrictions could shake things up. If the final version of the bill includes strict limits on rewards, Coinbase might reconsider its support. The legislation is expected to be reviewed by at least one Senate committee this week. However, Coinbase has not made any public statements yet. The debate has banks and crypto firms on opposite sides. Some lawmakers are considering rules that would only allow banks or licensed financial firms to offer stablecoin rewards. Banks are in favor of this idea, arguing that rewards could draw deposits away from traditional banking and reduce lending.On the other hand, crypto firms like Coinbase are against this move. They believe that restricting rewards to banks would give traditional lenders an unfair advantage and make it harder for crypto platforms to compete. Stablecoin rewards are a significant source of income for Coinbase. The company earns interest from reserves backing USDC, a stablecoin linked to the dollar and issued by Circle. When users hold USDC on Coinbase, the interest from those reserves provides a steady income stream, even when trading is slow. To encourage users to hold USDC, Coinbase offers rewards of about 3. 5% on certain holdings. If new rules limit these incentives, users might move their stablecoins elsewhere. This could put pressure on Coinbase's revenue. Stablecoin-related revenue is expected to reach about $1. 3 billion in 2025, making it a crucial part of Coinbase's business. Despite the uncertainty, Wall Street has a Moderate Buy consensus rating on Coinbase Global stock. Based on 17 Buy, seven Hold, and one Sell recommendation, the average stock price target of $361. 63 indicates a potential upside of 50. 19%.