Coinbase CEO Brian Armstrong has labeled any attempt to amend the recently passed GENIUS Act to further restrict stablecoin rewards a "red line" for the crypto industry at a time there is increased pressure from banking trade groups.
On his X account on December 26, 2025, Armstrong accused conventional banks of unethical lobbying to protect their business model, but eventually, he predicts, they will come forward in support of the yields of stablecoins once they realize the market potential.
The comments follow the growing disagreement between traditional financial institutions and crypto platforms over how returns on stablecoin reserves are shared with users.
Key Rules Behind GENIUS Act, America's New Stablecoin Framework
President Donald Trump signed the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act into law on July 18, 2025, following Senate approval on June 17, 2025, with a 68-30 vote and House passage on July 17, 2025, in a vote of 308-122.
The legislation created the first federal framework for payment stablecoins, requiring 1:1 backing with high-quality assets like cash or United States Treasuries, monthly disclosures, and compliance with anti-money laundering rules. Compliant stablecoins will not be classified as securities or commodities moving forward.
A key provision prohibits issuers like Circle or Tether from directly paying interest or yields to holders in order to prevent them from operating like unregulated banks.
Although paying interest through a third-party service, like Coinbase, is allowed. Coinbase (NASDAQ: COIN) currently provides competitive interest rates for USDC, higher than a conventional savings account, which provides a return ranging from 0.4% to 0.6%.
Implementation is in progress, with the FDIC approving the notice of proposed rulemaking on December 16, 2025, concerning bank subsidiaries seeking to issue stablecoins.
Why Banks Want GENIUS Act Changes
The banking industry associations are calling on Congress to review and amend the GENIUS Act, arguing that third-party reward programs are an unaddressed loophole and pose risks to deposit stability, especially for community banks.
Armstrong dismissed the arguments as "mental gymnastics" and a "wasted" effort, noting how banks make about 3.65% interest on the reserves maintained at the Federal Reserve, the current interest on reserve balances rate, while passing on far less to depositors.
He cited “the innovator’s dilemma” to show that soon banks will likely call on lawmakers to allow yields.
Over 125 cryptocurrency companies, such as Coinbase, Gemini, and Kraken, have formed a coalition opposing amendments, warning they would reduce competition and consumer benefits.
As of December 27, 2025, no amendments have been approved yet, though the lobbying efforts are getting attention at a time of the growing financial regulations in the United States.
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