Stablecoin Rewards Delay Clarity Act Momentum

Banks vs. Coinbase Stablecoin Rewards

One of the main points of contention in the latest hold up appears to be an issue with stablecoins, particularly the way in which direct and indirect rewards are disbursed. Originally part of the flurry of escalations prior to the GENIUS ACT vote, stablecoin rewards and yields (and the configuration thereof) were always a contested but settled concept.

Coinbase (reported by Bloomberg) has recently come out and stated that they are unlikely to support any version of the Clarity Act that allows for either: a complete ban on stablecoin rewards from holding payment stablecoins and their reserves, or a re-review of the original Section 10(a) within the GENIUS Act where there is already an implemented curfew to stablecoin issuers preventing them to give out yields to users directly, thus slowing down the stablecoin rewards debate.

This will affect the largest U.S. exchange with their existing offers to users of the Coinbase One Card, who are able to receive Coinbase USDC rewards on their stablecoin balance from within the Coinbase wallet. Additionally, before Christmas they had announced custom issuance for enterprise clients to work on their stablecoins with USDC as reserves. So removing stablecoin rewards and yields entirely or restricting them even further means a difficult road ahead for issuers like Circle.

From the banks' viewpoint, and this is mainly community banks around different states, there is an inherent risk of impact towards the change in the number of deposits as overtime, people can start to use stablecoin wallets and migrate their checking accounts and savings into stablecoins - for which there are countless of providers at this stage.

For the bigger investment and international banks like Bank of America, J.P. Morgan and Citi, this is less of concern as parallel deposit token services are being rolled out. SoFi for example, had recently announced its own stablecoin to be released sometime this year.

This is perhaps a 10 year overall societal shift that will likely take place in every country and for the consumer, a lot of the times the opportunity to relay some yield or rewards as an incentive is a better product proposition.