According to a closely-watched cryptocurrency market structure bill, many digital asset firms, including Coinbase, appear poised to continue offering rewards to customers holding stablecoins. A bipartisan amendment was released late Monday by the U.S. Senate Banking Committee in preparation for a markup session scheduled for Thursday. The amendment's language seems designed to prohibit crypto exchanges from providing rewards linked to stablecoin holdings but simultaneously clarifies certain activities exempt from this restriction, including specific rewards associated with loyalty or incentive program membership. This wording is likely to be welcomed by companies like Coinbase Global, Inc. (COIN.US), which currently offers rewards for stablecoin holdings to its customers.
The largest U.S. crypto exchange, Coinbase, is reportedly intensifying its lobbying efforts with American legislators, aiming to preserve its business model of offering rewards to stablecoin holders within the crypto asset market structure bill, which is advancing to Senate consideration. Sources indicate that if the bill introduces restrictions on reward mechanisms that go beyond disclosure requirements, Coinbase may reconsider its support for the legislation.
Coinbase reportedly generates yield on the US Dollar Coin (USDC) stablecoins that users keep on its platform and then distributes a portion of that interest to users under the name of "rewards." Banks, however, worry this equates to "high-interest deposit gathering" without being subject to reserve requirements or FDIC insurance, while also fearing such practices could divert funds from traditional bank deposits. Therefore, if the crypto market structure bill defines this activity as a "deposit" or prohibits third parties from distributing interest, Coinbase's stablecoin interest revenue stream could be eliminated entirely. Coinbase maintains that these are merely "marketing rewards," not "deposit interest."
The U.S. Senate Banking Committee and the Agriculture Committee plan to hold a markup hearing for the crypto market structure bill this Thursday. The two committees will prepare their respective new versions of the bill. The markup hearing will involve discussions and modifications to the bill's details. Before the Banking Committee released its latest amendment, the Agriculture Committee had already published its version of the bipartisan draft legislation. In that draft, Agriculture Committee Chairwoman Debbie Stabenow and Democratic Senator Cory Booker temporarily removed key chapters concerning decentralized finance (DeFi) and anti-money laundering, as bipartisan negotiations on the details continue.
This crypto market structure bill was passed by the U.S. House of Representatives in July of last year. The bill defines a "digital commodity" as a digital asset whose value is "inextricably linked to the use of a blockchain." This definition would exclude securities, derivatives, and stablecoins. The bill clarifies the division of regulatory responsibilities between the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC) regarding cryptocurrencies and outlines the registration and compliance standards required for relevant entities in the crypto space.
Senate Banking Committee Chairman Tim Scott stated, "The core objective of this bill is to position the United States as the global hub for the cryptocurrency industry—ensuring the next generation of jobs and innovations are established here at home, not overseas. By establishing clear and definitive rules of the road, we can provide entrepreneurs with the confidence to start businesses, hire employees, and grow right here in America."
Alex Thorn, Head of Research at Galaxy Research, suggested that discussions on whether to include DeFi under anti-money laundering rules might be the most far-reaching issue. He pointed out, "Other content still under negotiation includes the treatment of yields generated from stablecoin reserves, protections for non-custodial developers, and the SEC's authority to authorize or restrict token issuance." He added, "If a bipartisan-supported crypto market structure law can be passed, clearly defining token classification, clarifying regulatory jurisdiction, and protecting developers and non-custodial protocols, it would serve as a significant positive catalyst for cryptocurrency adoption."
However, investment bank TD Cowen indicated that while the crypto market structure legislation has room to advance this year, it is more likely to be passed in 2027, with final rules potentially not taking effect until 2029. The bank stated that the main obstacle stems from controversy over conflict-of-interest provisions: Democrats may push to restrict high-level officials (including former President Donald Trump) and their families from holding or operating crypto businesses. To facilitate the bill's passage, this provision might be delayed by approximately three years before taking effect, potentially to avoid applying to Trump.
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