Coinbase Threatens to Pull Backing for Senate Crypto Bill: Report

Group 1 - Coinbase is threatening to withdraw support for major crypto legislation if restrictions on stablecoin rewards are included, escalating tensions ahead of a critical markup scheduled for January 15 [1] - The largest US crypto exchange may reconsider backing the digital-asset market structure bill if the final text prevents platforms from offering incentives to customers holding stablecoins [1][2] - The threat comes as lawmakers race to finalize legislation that has already missed multiple deadlines throughout 2025, with Senate Banking Committee Chair Tim Scott setting a firm deadline for this week's markup [2] Group 2 - Traditional banking groups are lobbying to expand restrictions beyond the GENIUS Act, which currently bars stablecoin issuers from paying direct interest but allows third-party platforms to offer rewards [3] - One option under consideration would limit rewards to regulated financial institutions, a move supported by banking interests who argue that yield-bearing stablecoin accounts could drain deposits from community banks [3][4] - The American Bankers Association warned that if billions are displaced from community bank lending, small businesses and other borrowers will suffer, emphasizing that crypto exchanges cannot replicate FDIC-insured products [4] Group 3 - Crypto-native firms are pushing to preserve platform-based incentives as a viable model, warning that broader restrictions could eliminate competition in the sector [5] - For Coinbase, stablecoin rewards represent a significant revenue stream, with interest income generated from reserves backing Circle's USDC stablecoin providing steady revenue, especially during bear markets [6] - Coinbase owns a small stake in Circle, the largest stablecoin issuer in compliance with US law, highlighting the importance of these rewards for the company's financial health [6]