Coinbase Global, Inc. (COIN.US) is reportedly intensifying pressure on U.S. lawmakers in an effort to retain its authority to distribute rewards to users holding stablecoins. The company fears this business line faces a severe threat if certain restrictive clauses currently under review are incorporated into a major cryptocurrency bill scheduled for release on Monday. According to sources familiar with the matter, if the nation's largest crypto exchange determines that the Digital Asset Market Structure Act—set to enter the markup stage in at least one Senate committee on Thursday—contains any provisions related to rewards that go beyond enhanced disclosure requirements, it may reconsider its support for the legislation. It is understood that Coinbase earns interest on the USD Coin (USDC) stablecoins users keep on its platform and then distributes a portion of that interest to users under the guise of "rewards." Banks are concerned this equates to "offering high-interest deposits" without being subject to constraints like reserve requirements or FDIC insurance; Coinbase, however, insists this is merely a "marketing reward" and not "deposit interest." If the bill defines this activity as a "deposit" or prohibits third parties from distributing interest, Coinbase's revenue from this stablecoin interest stream would be effectively eliminated. Coinbase has not responded to requests for comment. Industry insiders reveal that the regulatory framework currently being developed intends to strictly limit the authority to issue such rewards to regulated financial institutions. Some banking sector representatives have expressed support for this approach, arguing that stablecoin accounts offering interest returns could divert funds from traditional bank deposits. Notably, Coinbase has applied for a national trust charter; if approved, it could offer user rewards compliantly within a regulatory framework. Meanwhile, native crypto firms are vigorously lobbying for an exception that would allow platform reward models to continue even without a charter, warning that broader restrictions could completely upend the existing competitive landscape of the industry. The threat to withdraw support is potent. During the 2023-2024 election cycle, the crypto industry emerged as the largest corporate political donor, funneling substantial funds to favored candidates. Led by its co-founder and CEO Brian Armstrong, Coinbase contributed $1 million to U.S. President Donald Trump's inauguration and was among the companies that donated to fund a proposed White House banquet hall. For Coinbase, reward revenue is critically important. The exchange shares in a portion of the interest generated by the reserves backing Circle's (CRCL.US) stablecoin, USDC; the USDC held on Coinbase provides a stable revenue stream, particularly crucial during bear markets. Coinbase also holds a minority stake in Circle, which is currently the largest stablecoin issuer compliant with the new federal law enacted in July. For instance, Coinbase incentivizes users to hold USDC through its "Coinbase One" program, which offers a 3.5% reward on balances. If the market structure bill prohibits such reward programs, the number of users holding stablecoins could decline—and data suggests Coinbase's total stablecoin revenue for 2025 is estimated at $1.3 billion, a figure that could consequently shrink. The devil is in the details, and the full impact remains difficult to quantify, still dependent on the bill's final wording. However, sources familiar with the discussions indicate one thing is clear: the bill will undoubtedly include provisions related to rewards. The so-called GENIUS Act, a significant gift to the digital asset industry early in Trump's second term, including the first federal regulatory framework for stablecoins enacted in July. Following the bill's signing, entities from retailers to traditional financial institutions announced intentions to enter the stablecoin arena; the Trump family had positioned itself ahead of the curve, with World Liberty Financial, co-founded by a family member, having already issued a stablecoin named USD1. Although the White House desires rapid implementation of the legislation, the controversy over stablecoin rewards is eroding bipartisan support for the market structure bill. Coinbase's warning that it might retract its support highlights escalating tensions that could delay the bill's review—or even cause the legislative effort to fail entirely this year. Bloomberg Intelligence analyst Nathan Dean stated that due to a lack of bipartisan support during the markup stage, the probability of the bill passing in the first half of the year has fallen below 70%. The GENIUS Act prohibits stablecoin issuers from paying any interest or yield solely for "holding the token," but it does not prevent third-party distribution partners like Coinbase from offering clients rewards linked to their balances. The banking industry strongly opposes exchanges offering stablecoin rewards, arguing it could siphon deposits from the banking system and weaken community lending. The American Bankers Association wrote in a recent letter, "If tens of billions of dollars flow out of community bank loans, the small businesses, farmers, students, and homebuyers in our towns will be hurt. Crypto exchanges and their stablecoin-affiliated entities are not designed to fill this lending gap, nor can they offer FDIC-insured products—a fact conspicuously omitted from their aggressive advertising." The crypto industry counters that the banking sector is attempting to overturn the consensus already achieved by the GENIUS Act. Coinbase's Chief Policy Officer, Faryar Shirzad, recently argued that preserving reward programs linked to stablecoins is crucial for maintaining the U.S. dollar's dominance. Industry participants and observers say this opposition places senators in a difficult position: under pressure from the administration to pass more legislation, they must make a decision on an issue where compromise appears elusive. Sources suggest a potential compromise would be to allow only entities holding banking charters or meeting the definition of a financial institution to provide rewards for stablecoin balances. Recently, five crypto companies received conditional approval from the Office of the Comptroller of the Currency to become national trust banks; these approvals have also faced fierce criticism from banking lobby groups, who argue that the limited trust charter's intended use is being stretched by crypto firms, potentially threatening the stability of the U.S. financial system. Given the recent charter approvals, if the market structure bill permits companies with trust charters to distribute yields, it might placate some within the crypto industry. Should restrictive measures ultimately be enacted, some industry insiders believe it would merely initiate a new round of "whack-a-mole"—with crypto companies finding new ways to reward users. William Gaybrick, President of Technology and Business at payment giant Stripe, said in an interview last year, "In any world, we can reward consumers for taking actions inside an app. In a world where you hold stablecoins in an app, that app will always find some way to give you 'credit'."