Coinbase Threatens to Pull Backing for Senate Crypto Bill: Report

Coinbase is threatening to withdraw support for major crypto legislation if Senate negotiators insert restrictions on stablecoin rewards beyond enhanced disclosure requirements, escalating tensions ahead of a critical markup scheduled for January 15.

The largest US crypto exchange may reconsider backing the digital-asset market structure bill if the final text includes language that prevents platforms from offering incentives to customers holding stablecoins, according to Bloomberg.

A Coinbase representative directed Bloomberg to comments Brian Armstrong made in December, where the CEO predicted that banks “would in a few years come to lobby for” stablecoin yield, despite their current opposition.

The threat comes as lawmakers race to finalize legislation that has already missed multiple deadlines throughout 2025, with Senate Banking Committee Chair Tim Scott setting this week’s markup as a firm deadline after months of stalled negotiations.

Banking Industry Pushes for Broader Yield Restrictions

Traditional banking groups are lobbying to expand restrictions beyond what Congress established in the GENIUS Act, which bars stablecoin issuers from paying direct interest but allows third-party platforms to offer rewards.

One option under consideration would limit rewards to regulated financial institutions, a move backed by banking interests who argue that yield-bearing stablecoin accounts could drain deposits from community banks.

The American Bankers Association wrote in a recent letter that “if billions are displaced from community bank lending, small businesses, farmers, students, and home buyers in towns like ours will suffer.“

The group warned that crypto exchanges cannot replicate FDIC-insured products or fill the lending gap created by deposit outflows.

Coinbase has applied for a national trust charter that could eventually allow it to offer rewards under such rules.

However, crypto-native firms are pushing to preserve platform-based incentives as a viable model even without banking licenses, warning that broader restrictions could eliminate competition in the sector.

Stablecoin Rewards Generate Critical Revenue for Coinbase

For Coinbase, the rewards represent a significant revenue stream worth protecting.

The exchange and Circle Internet Group share interest income generated from reserves backing Circle’s USDC stablecoin, with USDC parked at Coinbase providing steady revenue that becomes especially important during bear markets.

Coinbase also owns a small stake in Circle, currently the largest stablecoin issuer in compliance with US law.

The platform encourages users to hold USDC by offering 3.5% rewards on Coinbase One balances.

If the market structure bill bans such incentives, fewer customers may hold stablecoins on the exchange, potentially reducing Coinbase’s total stablecoin revenue, which Bloomberg data projects reached $1.3 billion in 2025.

Faryar Shirzad, Coinbase’s chief policy officer, argued in a recent post that preserving reward schemes is important for maintaining dollar supremacy, noting that China announced plans to start paying interest on its digital yuan starting January 1, 2026.

“Undermining the supremacy of the USD has been a longstanding goal of the PRC—the Senate banning rewards would be a big assist to China’s efforts,” he wrote.

Bipartisan Support Erodes as Midterms Approach

While the Trump administration supports swift legislative action, the stablecoin rewards dispute has fractured bipartisan backing for the market structure bill.

Senate Agriculture Committee Chair John Boozman is considering delaying his committee’s January 15 vote to allow more time for negotiations with Democratic lead negotiator Cory Booker.

Boozman stated earlier this week that he intended to hold the vote next week regardless of bipartisan support. Booker expressed hope on Thursday that the two sides could reach an agreement.

Adding to the stalling vote, TD Cowen warned earlier this month that the 2026 midterm elections could delay passage until 2027, with Senate Democrats potentially withholding support as lawmakers position for the next cycle.

Bloomberg Intelligence analyst Nathan Dean suggested the markup’s lack of bipartisan support may push odds of first-half passage below 70%.

The legislative push unfolds as multiple Senate committees prepare parallel markups, with White House crypto czar David Sacks pressing lawmakers to act this month amid momentum to create clearer regulatory frameworks for digital assets.

Industry insiders believe that even if restrictions pass, crypto companies will find new ways to reward users, creating a regulatory game of whack-a-mole as firms seek alternative incentive structures.

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