Coinbase raises pressure as crypto bill moves to Senate markup

Core Viewpoint - Coinbase is advocating for the preservation of its ability to offer rewards on stablecoin holdings, which is at risk due to potential restrictions in an upcoming crypto market-structure bill [6][9]. Group 1: Coinbase's Business Model and Revenue - Coinbase offers a 3.5% reward on USDC balances to encourage users to hold stablecoins on its platform, which is crucial for maintaining a steady revenue stream, especially during bear markets [1][2]. - The company shares interest income generated from reserves backing Circle's USDC stablecoin, making this revenue model significant for its financial health [2]. - Total stablecoin revenue for Coinbase is projected to reach $1.3 billion by 2025, highlighting the importance of stablecoin incentives for the company's future earnings [1]. Group 2: Legislative Context and Industry Impact - The GENIUS Act, signed in July, established a regulatory framework for stablecoin issuers but prohibits stablecoin issuers from paying interest or yield directly, while allowing third-party platforms like Coinbase to offer rewards [10]. - The ongoing discussions around the market-structure bill have created tensions, with Coinbase warning it may withdraw support if the bill includes restrictions beyond enhanced disclosure requirements [5][9]. - The banking industry is pushing back against yield-bearing stablecoin accounts, arguing they could divert deposits from traditional banks, which could impact community lending [11]. Group 3: Potential Outcomes and Industry Reactions - A proposed solution is to restrict rewards to entities with banking licenses, which could satisfy some concerns from the banking sector while allowing crypto firms to maintain some level of rewards [13]. - Industry insiders believe that if restrictions are imposed, crypto companies will find alternative ways to reward users, indicating a persistent demand for such incentives [14]. - The bipartisan support for the market-structure bill has been eroded due to the stablecoin rewards debate, potentially delaying its passage [9].