The ongoing legislative deadlock over stablecoin regulation, particularly the stalled CLARITY Act, has created an environment where Coinbase’s current USDC rewards program can continue to operate, despite opposition from the banking industry. Coinbase CEO Brian Armstrong is actively defending the company’s USDC rewards program, distinguishing it from traditional bank interest and arguing that it is not subject to the same regulatory oversight.
Coinbase currently offers USDC rewards ranging from 3.75% to 4.5%. These rewards are funded by interest earned on short-term US Treasuries held by Circle, through a revenue-sharing arrangement. This structure is central to Coinbase’s defense, as it differentiates the yield from bank interest, which is subject to banking regulations.
Armstrong has framed the debate by positioning banks as incumbents seeking government intervention to protect their deposit base rather than competing on merit. He has also highlighted the irony that legislative inertia, partly influenced by banks, has inadvertently benefited Coinbase by preventing new competitors from entering the market under clearer rules. Furthermore, Armstrong has argued that restricting domestic stablecoin rewards could push users toward foreign-issued digital currencies, which would not hold US Treasuries as reserves or contribute to demand for American government debt, potentially impacting US competitiveness and dollar hegemony.
The banking industry, however, has raised concerns about potential deposit flight, with lobbyists warning that stablecoin rewards programs could lead to trillions of dollars moving out of traditional savings accounts. These concerns have fueled legislative efforts, such as the CLARITY Act, a broader crypto market structure bill. Banks have pushed for language within such legislation that would effectively neuter programs like Coinbase’s.
The GENIUS Act, enacted around July 2025, prohibits stablecoin issuers from offering yield directly to holders but includes a carve-out for non-issuers. Coinbase, which distributes but does not issue USDC, falls into this category. However, the CLARITY Act became a significant battleground. As of September 2026, the CLARITY Act had failed to advance, primarily due to disputes over provisions related to rewards programs. This legislative inaction has allowed Coinbase’s current model to persist.
Despite the current operational status, uncertainties remain. The future passage of the CLARITY Act or similar legislation with restrictive rewards language is a significant unknown. It is uncertain whether Coinbase would need to restructure or eliminate its rewards program if such legislation passes. The potential for foreign-issued digital currencies to attract users if domestic stablecoin rewards are restricted also remains a point of consideration.
Coinbase’s USDC rewards program has become a significant customer acquisition tool, attracting users who might otherwise keep funds in high-yield savings accounts. The program’s ability to offer comparable or better rates within the Coinbase ecosystem, where users can also trade and stake assets, is a key draw. The distinction between USDC rewards and bank interest, as championed by Coinbase CEO Brian Armstrong, remains central to the company’s regulatory defense strategy and its positioning within the evolving financial landscape.
Why This Matters
The materials describe a narrow update: Coinbase CEO Brian Armstrong is defending the company’s USDC rewards program, distinguishing it from bank interest. The future passage of the CLARITY Act or similar legislation with restrictive rewards language.
Broader Context
Source materials place the factual news in this context: The GENIUS Act, which was enacted around July 2025, explicitly prohibits stablecoin issuers from offering yield directly to holders. But it left a carve-out for non-issuers. Coinbase, which distributes USDC but doesn’t issue it, falls squarely into that gap.
