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Introduction: Policy Rift Deepens
The GENIUS Act—the landmark law governing stablecoin payments in the United States—has ignited a fierce debate between crypto innovators and traditional banks. As the US Treasury Department prepares to shape its implementation, both sides are vying to influence how stablecoin yields will be regulated.
At the heart of the dispute lies a key question: Should crypto exchanges like Coinbase be allowed to pay interest on stablecoin holdings, or should all such yields be banned entirely?
This policy rift highlights the growing tension between the government’s desire to ensure financial stability and the crypto industry’s demand for innovation-friendly regulation.
Coinbase Defends Congressional Intent
In a formal letter to the US Department of the Treasury, Coinbase argued that regulators must not exceed the authority granted by Congress in the GENIUS Act. The exchange insists that while the law restricts stablecoin issuers from offering interest or yield, it does not extend that restriction to non-issuers such as exchanges or wallet providers.
According to Coinbase, the Treasury cannot override Congress’s intent, which was to encourage responsible growth in the stablecoin ecosystem without stifling innovation. The company’s position underscores its broader campaign for balanced crypto regulation—one that safeguards consumers but also allows platforms to offer competitive financial products.
“Congress went no further,” Coinbase emphasized in its letter. “Banning other types of payments on stablecoins across the board would have inhibited growth and innovation—contrary to the GENIUS Act’s core purposes.”
The exchange further called on the Treasury to exclude non-financial software developers, blockchain validators, and open-source protocols from the Act’s purview, noting that these entities do not engage in payment activities that should trigger compliance obligations.
Banking Groups Demand Blanket Ban
While Coinbase defends flexibility, traditional banking institutions have taken the opposite stance. The Bank Policy Institute (BPI), alongside several financial associations, urged the Treasury to impose a blanket ban on stablecoin interest payments, whether made directly by issuers or indirectly by their affiliates.
“Implement the GENIUS Act’s prohibition on the payment of interest or yield on payment stablecoins—whether paid directly by an issuer or indirectly through its partners,” BPI said in a joint statement.
The group argues that allowing stablecoin yields could lead to massive deposit outflows from traditional banks. In a prior submission to regulators, BPI estimated that as much as $6.6 trillion could move from bank accounts to stablecoins if the yield gap widened significantly.
For banks, this scenario represents an existential threat to their core business of deposit-taking and lending. They view unrestricted stablecoin yields as a direct competitor to the savings accounts that form the foundation of the traditional financial system.
Treasury Caught in the Middle
The US Treasury now finds itself navigating conflicting guidance from two powerful lobbies. Its challenge lies in balancing financial stability with technological progress, ensuring that stablecoin regulation does not undermine either the banking sector or crypto innovation.
The recent round of public comments—part of the Treasury’s Advance Notice of Proposed Rulemaking (ANPRM)—marked the second opportunity for stakeholders to influence the direction of the GENIUS Act’s implementation.
The feedback highlights the lack of consensus on what “stablecoin yield” truly means in a legal and financial context. Should a crypto platform offering rewards on USD-backed stablecoins be treated like a bank, or more like a tech provider facilitating payments?
Treasury officials are expected to release a draft proposal in early 2026, setting the stage for what could be one of the most consequential regulatory showdowns in digital finance.
What’s Next for Stablecoins
Signed into law in July 2025, the GENIUS Act is scheduled to take effect 18 months after enactment, or 120 days after final regulations are issued—whichever comes first. This places its full enforcement window between late 2026 and early 2027.
As that deadline approaches, the contours of the US stablecoin market could shift dramatically. If the Treasury sides with the banks, interest-bearing stablecoins may vanish from American platforms, potentially driving users toward offshore exchanges or decentralized finance (DeFi) alternatives.
Conversely, if Coinbase’s interpretation prevails, the United States could see a new wave of crypto-based savings products, deepening stablecoin adoption across mainstream finance.
For now, all eyes are on the Treasury’s next move—one that could define the future of digital dollar regulation and the balance of power between Wall Street and Web3.
Conclusion: Innovation or Oversight
The GENIUS Act debate underscores a defining tension in modern finance—how to regulate without restricting progress. As crypto platforms seek legitimacy and banks protect their dominance, the Treasury’s implementation choices will determine whether stablecoin yields become a symbol of responsible innovation or a casualty of regulatory caution.In the end, the battle over stablecoin interest is more than a policy dispute—it’s a referendum on how far the US is willing to go in embracing the digital economy.