Banks Escalate Fight to Curb Stablecoin Rewards

The American Bankers Association is pressing Congress to revise the roughly 600-page CLARITY Act, arguing that stablecoin platforms’ balance-based rewards could pull deposits from community banks and weaken local lending. The dispute turns on where lawmakers draw the line between prohibited returns on idle funds and incentives tied to payments, trading, collateral or other onchain activity. The outcome will shape how banks and crypto companies compete for dollar balances under the emerging U.S. stablecoin framework.

Coinbase Chief Policy Officer Faryar Shirzad said on Aug. 25, 2026, that the industry’s warning is not borne out by available data. Coinbase has offered rewards on USDC for more than four years, while community-bank deposits rose 26%, or about $482 billion, from June 2019 through March 2026. Shirzad also cited studies by Charles River Associates and the Council of Economic Advisers that found no significant relationship between stablecoins and deposits, supporting his call for lawmakers to preserve the negotiated bill language.

The US Congress is advancing digital-asset market structure legislation that would clarify the division of regulatory authority between the Securities and Exchange Commission and the Commodity Futures Trading Commission. The dispute extends to the GENIUS Act, signed on July 18, 2025. Although the law bars issuers from paying interest, exchanges may be able to circumvent the restriction by offering rewards, potentially affecting bank deposits and local lending.

Senate Banking Committee Chairman Tim Scott scheduled a review of the bill for January 15, 2026. On January 12, the American Bankers Association and seven other banking and credit union groups jointly lobbied for a comprehensive ban on stablecoin yields and rewards. Their letter cited a US Treasury estimate that as much as $6.6 trillion in deposits could leave the banking system.

Trump signed the GENIUS Act on July 18, 2025, establishing the first U.S. federal framework for payment stablecoins and requiring issuers to maintain reserves of at least 1:1 in assets such as dollars and short-term U.S. Treasuries. The law bars issuers from paying interest directly but does not explicitly prohibit platforms such as Coinbase from offering rewards. Banks fear deposit outflows could impair their lending capacity, and the dispute is also affecting consideration of the CLARITY Act.

After meeting Coinbase CEO Brian Armstrong on March 3, 2026, Trump accused banks of “threatening and undermining” the GENIUS Act and demanded that they reach an agreement with the crypto industry. On May 1, the American Bankers Association and 52 state banking associations petitioned the Office of the Comptroller of the Currency to close the third-party interest-payment loophole. The OCC is reviewing responses concerning a draft of nearly 400 pages and more than 200 questions.