US banking industry groups have made powerful arguments that the GENIUS Act imposes a blanket ban on the payment of interest or rewards on stablecoins. The stakes are significant: crypto exchanges such as Coinbase are offering rewards on stablecoin balances which far exceed bank deposit rates, creating direct competition for deposits. Meanwhile, a narrow interpretation would enable PayPal to continue offering rewards on its own-brand stablecoin because, technically, it is not the issuer.
The GENIUS Act blocks stablecoin issuers from paying interest or other rewards linked to stablecoin usage or balances. This is intended in part to protect bank deposits that support credit financing to the economy. However, the Act’s clause did not appear to apply to indirect payments by non-issuers like Coinbase. Until now.
The “joint trades” made up of US banking associations (see below) responded to the US Treasury request for input to help formulate detailed regulations. The GENIUS Act is quite high level in its direction, and these regulations flesh out the details. Coinbase also responded to the Treasury, asking it to stick to “GENIUS as written.” But based on the joint trades’ thorough analysis, the “as written” does not appear to favor Coinbase’s position.
The joint trades argue that both the statutory language and the legislation’s objectives support a broad interpretation of the interest ban. For starters, they note that the interpretation of remuneration is broad, including “any form of interest or yield (whether in cash, tokens, or other consideration)”. “Other consideration” and the general wording of the Act could be construed as covering any economic benefit, including indirect payments from the issuer. But that’s not the most compelling argument.
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