Could a stablecoin rewards ban give Coinbase a competitive edge?

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Coinbase head Brian Armstrong said a ban on stablecoin rewards would “ironically” make the company more profitable. He even argues that the policy would harm customers. This comes in when the crypto market is dealing with increased selling pressure and sentiments dipping in “Extreme Fear.”

In a recent post, Armstrong wrote that if a crypto rewards ban became law, Coinbase would benefit financially. This is because the exchange currently pays out large amounts in rewards to users holding USDC. The stablecoin market cap is on a surge and hovers around $314 billion. 

Coinbase defends USDC yield payouts

Coinbase CEO in a post mentioned that “But we don’t want this to happen,” as customers should continue receiving rewards. He added that the regulated US stablecoins should remain competitive globally. These comments landed as lawmakers are debating the provisions in the pending market structure legislation bill that could restrict interest or rewards paid on stablecoins. 

Banks have reportedly pushed for language prohibiting such payouts. They argue that yield-bearing stablecoins could draw deposits away from insured lenders. In a way, it could threaten financial stability, they insist. Meanwhile, crypto firms say that rewards are essential to attracting users and competing with offshore platforms.

Coinbase offers USDC rewards as a headline feature. As of February 2026, the platform advertises a 3.50% annual yield on USDC balances. However, this benefit is limited to Coinbase One subscribers which is a paid membership on the platform. Free accounts no longer earn rewards.

Tether’s USDT is the biggest stablecoin in the market. It holds a circulation of more than 183 billion. Circle’s USDC stands 2nd in the tally with a circulation of over 73.4 billion. The Trump family-backed stablecoin, USD1, went on to hit the 5.28 billion circulation mark.

Coinbase margins in focus

Taking a look at it from the financial outlook, a ban could reduce Coinbase’s costs. The exchange generates revenue from USDC held on and off its platform. This is done through its partnership with issuer Circle. The exchange earns a share of interest income from the dollar reserves backing the stablecoin. If rewards were eliminated, then it would retain more of that interest spread rather than distributing a portion to users.

Data shows that the stablecoin operations have become a growing contributor to Coinbase’s revenue mix. Its fresh quarterly results show that subscription and services revenue rose 13.5% to $727.4 million. Stablecoin revenue increased to $364.1 million from $225.9 million.

Amid this growth, Cryptopolitan reported that Coinbase printed a net loss of $666.7 million, or $2.49 per share, for the quarter ended Dec. 31. Transaction revenue fell sharply as digital asset prices slumped in the final months of 2025.

The global crypto market retreated from early October highs. It was a reaction to President Donald Trump’s new tariffs on Chinese imports and expected export controls on critical software. Bitcoin price has dropped by almost 30% in the last 30 days. It is running down by more than 45% from its all time high (ATH) of $126,198 recorded on October 7 2025. BTC is trading at an average price of $68,868 at the press time.

The stablecoin debate has bagged the spotlight among the investors. The GENIUS Act, which was passed last year, created a federal framework for stablecoins. On the other side, there is the Clarity Act that aims to define regulatory boundaries between the Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC). It has been stalled amid disagreements over stablecoin rewards.

Coinbase withdrew its support over certain provisions. This has been cited as a factor in the delay. A recent White House meeting tried to fix the differences between banks and crypto firms. But it ended without a breakthrough.

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