Coinbase chief executive Brian Armstrong has rejected calls for crypto platforms offering stablecoin rewards to be subject to the same capital and liquidity requirements as banks.
In a 19 September interview with Money Rehab, Armstrong said rewards linked to USDC mainly reflected a share of the returns generated by the assets backing the stablecoin, including short-term US Treasuries.
“If you want to hold a stablecoin, you could actually earn reward,” Armstrong said. “Why shouldn’t consumers be able to benefit from that?”
The comments come as stablecoin rewards become a major point of disagreement in Washington. Banks argue that digital dollars offering higher returns could draw deposits away from the traditional financial system.
Armstrong said rewards linked to USDC should not be confused with interest paid on bank deposits.
“We’re not engaging in fractional reserve lending,” he said. “That’s what you need a bank license for.”
The GENIUS Act, signed into law in July 2025, requires permitted payment stablecoin issuers to hold reserves worth at least the value of the tokens in circulation. Those reserves must consist of eligible liquid assets.
The legislation prevents issuers from paying interest or yield directly, but leaves unresolved questions about rewards offered by exchanges and other third parties.
Armstrong said Coinbase was not a stablecoin issuer. USDC is issued by Circle, a close partner of the exchange. He argued that imposing bank-style regulation on Coinbase would fail to reflect the structural difference between the businesses.
His argument is that bank rules are designed to address the risks created when institutions lend out customer deposits, whereas fully reserved stablecoins operate on a different model.
Banking organisations, including the American Bankers Association, strongly dispute the suggestion that the issue is simply an attempt to protect established firms. They say rewards tied to stablecoin balances could operate in a similar way to deposit interest and encourage customers to move money from community banks.
Armstrong described the campaign for tighter restrictions as an attempt by some large banks to reduce competition.
“I think mainly the reason is competition,” he said. “They just didn’t want to have to compete with stablecoins that were paying these higher rates.”
The White House Council of Economic Advisers has also examined the issue. Its analysis estimated that banning stablecoin yield would increase total bank lending by about $2.1bn, while creating an annual welfare cost estimated at $800m. Banking groups have disputed the assumptions used in that analysis.
Armstrong said revisions to the CLARITY Act had resolved Coinbase’s earlier concerns over stablecoin rewards. However, the bill remains unsettled. On 15 September, the Senate rejected cloture on the motion to proceed by 49-50, below the 60 votes required.
The dispute therefore continues to centre on whether stablecoins should be allowed to compete directly with bank deposits and who should receive the returns generated by digital dollars.
Separately, the European Central Bank has launched Pontes, providing banks with a new way to settle tokenised assets in central bank money.
