Paying Interest on Stablecoins: Setting the Record Straight

A new media campaign led by Coinbase and the Blockchain Association presents misleading claims about the banking industry, the current law on stablecoin regulation (the GENIUS Act) and the intended scope of market structure legislation. Most banks and crypto companies have common goals: to innovate, serve their customers and help grow the economy. A misleading "banks vs. crypto" narrative and references to "bailouts" - deeply ironic given that a Coinbase partner (Circle) was the largest beneficiary of the Silicon Valley Bank rescue - make it harder to achieve consensus on policies that both encourage competition and address financial stability risks. Here are the facts:

• The GENIUS Act makes it illegal for stablecoin issuers to pay interest. It does not prevent an evasion of that law whereby crypto exchanges or affiliates pay interest indirectly on behalf of a stablecoin issuer.
  
  BPI opposed stablecoin issuers paying interest under GENIUS and continues to oppose stablecoin exchanges and affiliates paying interest under market structure. The need for an anti-evasion provision was left open, not rejected, during deliberations on the GENIUS Act:

• Stablecoin "rewards" are interest payments. The crypto industry is working hard to disguise the "rewards" they offer on their stablecoins from what they truly are: interest paid indirectly by stablecoin issuers to stablecoin holders. However, even within the crypto industry, the public messaging has been inconsistent:
  a. Coinbase Chief Legal Officer Paul Grewal in February 2023addressed whether stablecoins should be treated as more than just payment instruments, saying that "No one reasonably expects a profit from them - their value stays the same - and certainly not any profit derived from the managerial efforts of others."
  b. In February 2025testimony to the House Financial Services Committee on the STABLE Act, PayPal explicitly framed PYUSD as a paymentsproduct: "designed for commerce and payments… to enable efficient and cost-effective payments.
  c. In a July 2025statement following the passage of the GENIUS Act, Coinbase framed stablecoin yields from rewards as a competitive alternative to bank deposit rates.
  d. In an earnings presentation on July 31, 2025, Coinbase CEO Brian Armstrong, Coinbase CEO, pivots to arguing "we don't pay interest… we pay rewards."

• Rewards on credit cards are not like interest paid on a deposit account. Credit card rewards are issued based on payment usage.A stablecoin analogue for credit card rewards would be if exchanges offered lower transaction fees or if merchants offered a discount on purchases for using a certain stablecoin. The crypto industry is trying to muddle the debate by claiming that interest paid directly by stablecoin issuers is a "reward." A recent BPI note explains why stablecoin interest payments pose risks to the financial system.

• Banks and crypto firms are both pro-competition and are already partnering extensively to improve the customer experience. Banks are already competing for deposits with 4,000 other banks in one of the most competitive financial systems in the world. The claim that banks are trying to quash competition by disagreeing with crypto firms on certain policy aspects of stablecoin legislation ignores the partnerships the two industries have forged in recent years. Banks want to bring innovative services to their customers, and crypto companies help them deliver those services. Banks have also called on regulators to reverse overly prescriptive restrictions on engaging in blockchain technology and with crypto companies - for example, by supporting the banking agencies' removal of policy statements that restricted banks' crypto engagement, by opposing punitive capital treatment of crypto assets in Basel Committee standards, and by urging the President's Working Group on Digital Asset Markets to remove barriers to financial institutions engaging in crypto activities.

• Bank-like stablecoins without full regulatory protections put the financial system at risk. They are less regulated cousins of the money market mutual funds that required a bailout in 2008 and again in 2020. If the crypto industry wants "no more bailouts," they should support guardrails against the true bailout risk in this debate: pseudo-banks operating without adequate safeguards. Stablecoin issuers want to engage in banking activities, like paying interest. Being a bank requires the full suite of regulatory requirements, deposit insurance and discount window access that keep banks safe. Stablecoins seeking to offer banking services must be subject to those requirements and protections, rather than using workarounds and backdoors to pay interest, take deposits and access the federal payment rails.