Crypto Faces a Fight Over Stablecoin Rewards

Brian Armstrong, the CEO of Coinbase, recently took to social media to express his strong opposition to any attempts to reopen the GENIUS Act. He believes that banks are using their political influence to stifle competition from stablecoins and fintech platforms. Armstrong was surprised by the boldness of banks lobbying Congress so openly. He made it clear that Coinbase will not stand idly by and allow the GENIUS Act to be revised. Armstrong even predicted that banks might eventually change their tune and start lobbying for the ability to offer interest on stablecoins once they realize the potential benefits. The GENIUS Act, which was passed after lengthy negotiations, currently prohibits stablecoin issuers from paying interest directly. However, it does allow platforms and third parties to offer rewards. This distinction is crucial because it enables fintech companies to provide users with some form of yield-sharing. Max Avery, a board member at Digital Ascension Group, shed some light on why certain parts of the banking sector are pushing for changes to the legislation. He argued that proposed amendments would not only ban direct interest payments but also restrict broader rewards, effectively cutting off indirect yield-sharing mechanisms.Avery pointed out that banks currently earn around 4% on reserves parked at the Federal Reserve, but consumers often receive little to no interest on traditional savings accounts. Stablecoin platforms threaten this model by offering to share some of that yield with users. Despite banks' concerns about the safety of community bank deposits, independent research shows no evidence of disproportionate deposit outflows from community banks. This suggests that the banking sector's concerns might be more about protecting their own interests than genuine safety issues. In a positive development, US lawmakers recently introduced a discussion draft aimed at reducing the tax burden on everyday crypto users. The proposal would exempt small stablecoin transactions from capital gains taxes, allowing payments of up to $200 in regulated, dollar-pegged stablecoins to avoid gain or loss recognition. Beyond payments, the bill also targets taxation issues around staking and mining, allowing taxpayers to defer income recognition on rewards for up to five years. This move could make crypto transactions more accessible and less burdensome for everyday users.