If lawmakers ultimately ban stablecoin rewards under the proposed CLARITY Act, Coinbase (COIN) could lose a tool it uses to entice users to hold digital dollars on its platform, although analysts say the impact on the exchange’s business may be limited.
As lawmakers debate the future of stablecoin regulation in Washington, an unresolved question in the proposed CLARITY Act could have significant implications for the business model of Coinbase and other stablecoin partners: whether companies will be allowed to share yield with stablecoin holders.
The bill, which has been stalled in Congress since January, seeks to establish a regulatory framework for stablecoins (digital tokens typically pegged to the US dollar). A central point of controversy is whether cryptocurrency companies should be allowed to transfer the yield earned on the reserves backing those tokens. Banks and some lawmakers have pushed to ban interest payments, while cryptocurrency companies, including Coinbase, have argued that restricting rewards would undermine the usefulness and competitiveness of stablecoins.
However, this week there was a glimmer of hope from DC. One possible deal may be for stablecoin issuers and their partners to modify the language of their offerings to make them sound different from bank deposits, Sen. Cynthia Lummis said Wednesday.
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Still, for Coinbase, the issue is important because stablecoins, particularly USD Coin (USDC), have become a major source of revenue and user engagement.
Under the current draft of the CLARITY Act, stablecoin issuers would not be able to pay interest directly to their holders. But according to an industry source familiar with the legislation who did not want to be identified, the language leaves room for alternative structures that could still allow rewards to reach users.
“There are so many loopholes in the CLARITY Act when it comes to stablecoin yields that the genie is already out of the bottle,” the source told CoinDesk. While the bill prohibits issuers from paying interest, it does not clearly prohibit exchanges or platforms from distributing incentives such as rebates, credits or other rewards.
The distinction between “interests” and “rewards” is thin, the source added. Marketing incentives or loyalty programs could effectively replicate the economic impact of performance while remaining technically compliant. This echoes similar debates over guidance tied to the GENIUS Act, where the line between restricting performance and determining how it can be distributed across partners remains unclear.
Another provision of the bill may further complicate enforcement. The legislation contains an exception for activity-linked payments, meaning that performance could potentially be distributed if a stablecoin is used in transactions, lending or other financial activities. In practice, that could allow structures where stablecoins are routed through decentralized financial protocols to generate returns before those rewards are transmitted to users.
Even partnerships between issuers and exchanges could achieve a similar result. For example, an issuer could earn yield on Treasury reserves, share some of that revenue with an exchange partner, and have the exchange distribute rewards to users, an arrangement that regulators have warned could constitute evasion but is not explicitly prohibited in the bill’s current form.
“It seems as if even a mediocre marketer could come up with several creative structures that would deliver,” the source said.
Not ‘existential’
Wall Street analysts say the debate has implications for Coinbase, but is unlikely to threaten the company’s broader business model.
Clear Street analyst Owen Lau said the ability to share stablecoin performance is just one of many ways the company is attracting users to its platform.
“It’s important, but it’s not even close to existential,” Lau said. Coinbase already generates revenue from trading, derivatives, and its Base blockchain ecosystem, and many users come to the platform for services beyond stablecoin rewards.
In 2025, transaction revenue remained the exchange’s main source of revenue, although stablecoin revenue had increased exponentially from the previous year, generating $1.35 billion in 2025 compared to $910 million in 2024, making it the second largest revenue driver, according to a recent presentation.
Coinbase, however, has a slightly different view on this debate.
“Ironically, if a ban on crypto rewards were enacted, it would make us more profitable as we pay large amounts in rewards to our customers who hold USDC,” Coinbase CEO Brian Armstrong wrote in a post on X in February. “But we don’t want this to happen, it’s better for customers to get rewards and it’s better for the United States to keep regulated stablecoins competitive on a global stage.”
However, stablecoin incentives play a strategic role.
Clear Street’s Lau said Coinbase benefits when customers hold USDC on its platform because the company can capture the full share of the return generated by the reserves backing the token. If users move those assets to external wallets or decentralized platforms, Coinbase may receive only a portion of those revenues.
“If they can’t give enough incentives to customers, these people may steer USDC away from Coinbase wallets,” Lau said, which could reduce the company’s share of stablecoin-related revenue.
At the same time, the short-term financial impact may be limited. Lau noted that Coinbase largely passes on the performance of stablecoins to users, meaning revenues are often offset by expenses.
“From a profit perspective, it doesn’t really change much,” he said, adding that the bigger question is whether the restrictions could slow the long-term growth of USDC adoption.
If the final rules allow activity-based rewards or loyalty incentives, Lau said Coinbase could still use those programs to encourage customers to hold and use USDC on its platform, which could drive greater market capitalization for the stablecoin and increase the revenue Coinbase shares with Circle.
For now, the outcome remains uncertain as lawmakers continue to negotiate the text of the bill.
But even if strict limits on performance survive, analysts and industry participants say crypto companies are likely to adapt, ensuring stablecoins remain a competitive feature of the digital payments ecosystem.
Coinbase shares are down about 12% so far this year, while Bitcoin is down 19%.
