Coinbase Global has issued a stark warning to lawmakers just days before a pivotal Senate vote: the exchange may withdraw its critical backing for the digital asset market structure bill if the legislation restricts its ability to offer stablecoin rewards. As the Senate Banking and Agriculture Committees prepare for a dual markup session this Thursday, the dispute over Coinbase Senate bill support has emerged as a potential dealbreaker. At the heart of the conflict is a provision that could limit yield-bearing stablecoin accounts to traditional banks, a move Coinbase executives argue would unfairly tilt the playing field and stifle financial innovation.

The Battle Over Stablecoin Rewards Regulation

The controversy centers on the so-called "CLARITY Act," a comprehensive legislative package designed to establish clear rules of the road for the US crypto industry. While the bill aims to resolve jurisdictional disputes between the SEC and CFTC, a specific clause regarding stablecoin rewards regulation has sparked fierce opposition from the crypto sector. Sources close to the negotiations report that banking lobbyists are pushing for language that would prohibit non-bank platforms from passing yield generated by stablecoin reserves back to customers.

Under the framework of the GENIUS Act, signed into law in July 2025, stablecoin issuers like Circle are already barred from paying interest directly to token holders. However, third-party platforms like Coinbase have successfully used a workaround to offer rewards based on user balances—currently around 3.5% for Coinbase One subscribers. The new proposal threatens to close this avenue, reserving yield-bearing products exclusively for regulated financial institutions.

USDC Yield Restrictions and Revenue Impact

For Coinbase, the stakes are financial as well as ideological. Analysts estimate that stablecoin-related income, derived largely from its partnership with Circle and interest income on USDC reserves, contributed approximately $1.3 billion to the exchange's revenue in 2025. USDC yield restrictions would not only slash this high-margin revenue stream but also reduce the incentive for users to keep assets on the platform.

"If the final text effectively bans platform-based rewards, we are looking at a fundamental shift in the economics of the crypto exchange business," says a policy analyst familiar with the talks. Coinbase argues that such a ban would hand a monopoly on interest-bearing digital assets to the banking sector, neutralizing one of the crypto industry's most popular consumer value propositions.

Brian Armstrong and the Politics of Crypto Lobbying

The escalation reflects a more aggressive strategy in Brian Armstrong crypto politics. Coinbase's leadership has made it clear that their support is conditional. In recent discussions with Senate staff, company representatives emphasized that while they support the bill's broader goals of market structure clarity, they view the stablecoin reward ban as a "red line." This ultimatum puts significant pressure on Senate Banking Committee Chair Tim Scott and Agriculture Chair John Boozman, who are racing to secure bipartisan consensus before Thursday's markup.

The outcome of this standoff will likely set the tone for US crypto legislation 2026. If Coinbase—the largest US exchange and a primary political proxy for the industry—publicly opposes the bill, it could fracture the fragile coalition of lawmakers currently supporting the measure. With the mid-term election cycle approaching, the window for passing complex financial legislation is narrowing, making crypto lobbying efforts more intense than ever.

Banks vs. Crypto: The Deposit Flight Narrative

Traditional financial institutions maintain that stablecoin rewards regulation is a matter of safety and soundness. The American Bankers Association and other trade groups have long argued that allowing unregulated tech platforms to offer high-yield accounts risks siphoning deposits away from community banks. They contend that if crypto firms want to offer banking-like products, they should be subject to full bank supervision and capital requirements.

Coinbase counters that it has already applied for a national trust charter to operate within the regulatory perimeter but argues that the proposed bill would prematurely cut off competition before such pathways are fully established. As the Thursday markup approaches, all eyes are on whether a compromise can be reached—perhaps through enhanced disclosure requirements rather than an outright ban—or if the industry's most anticipated legislative victory will collapse under the weight of its own internal disagreements.