During the months-long debate over stablecoin legislation this spring, crypto industry leaders tried, and failed, to notch a key victory: getting lawmakers on board with interest-bearing stablecoins.
The GENIUS Act, which formally legalizes approved stablecoins in the U.S. and was signed into law last month, now prohibits stablecoin issuers from engaging in the increasingly common practice of offering users passive yield—typically, between 3% and 5%—on staked or deposited balances.
Republican congressional leaders ultimately deemed the incentive program too lucrative, arguing stablecoins should be greenlit as a payment currency, not as an investment product.
But in the aftermath of GENIUS’ passage, American payment heavyweights have barreled forward with plans to reward stablecoin holders with yields between 3% and 5% on deposits.
So what gives?
On quarterly earnings calls late last week, leadership at Coinbase and PayPal promised shareholders that both companies will remain committed to offering enticing “rewards programs” to stablecoin holders, despite prohibitions against stablecoin yield in the GENIUS Act.
When pressed on the issue by a shareholder during Coinbase’s earnings call Thursday, CEO Brian Armstrong doubled down on plans to offer holders stablecoin rewards long into the future, stating the program is a key reason customers choose Coinbase over competitors.
“[I]n the GENIUS Act, there is a prohibition by the issuer of stablecoins on paying interest and yield,” Armstrong said. “First, we are not the issuer. And second, we don’t pay interest in yield, we pay rewards,” he continued.
“And so long story short is we plan to continue to pay rewards to our customers, which are very competitive,” the CEO said. “We think it’s a differentiated product and it’s a major reason that people come and store their funds with Coinbase.”
Coinbase currently offers U.S. holders of the popular stablecoin USDC a 4.1% annual yield on deposits. USDC is issued by Circle, not Coinbase, and Circle itself does not offer rewards directly to USDC holders.
The finances of the two companies, however, are deeply interlinked, and Coinbase and Circle actually co-developed USDC as a joint venture—before Coinbase pulled out as an issuer of the stablecoin in 2023.
When asked why the GENIUS Act did not also prohibit firms like Coinbase from offering rewards to stablecoin holders, or why only issuers should be barred from such practices, a Senate staffer told Decrypt the legislation was narrowly tailored only to regulate stablecoin issuers, and that the bill was not the appropriate venue to consider how stablecoins should be regulated on secondary markets.
The Senate staffer added it was important to ensure stablecoin issuers specifically could not offer interest-bearing products to clarify that stablecoins are not deposit-like products similar to traditional bank accounts.
Excitement over stablecoin rewards programs has not been quarantined to only crypto-native firms. Earlier this year, PayPal began offering 3.7% annual returns to PayPal and Venmo customers holding the company’s stablecoin, PYUSD, in their accounts.
On an earnings call last week, PayPal CEO James Alexander Chriss reinforced his commitment to offering customers alluring rewards on stablecoin deposits, citing the program as a standout offering designed to attract new customers.
Despite the fact that PYUSD is PayPal’s native stablecoin, and is in fact named for the company, it is technically issued by a third-party company, Paxos. The Trump administration dropped a 15-month SEC investigation into PYUSD in April.