Coinbase CEO Brian Armstrong defends stablecoin rewards against banking comparisons

Coinbase CEO Brian Armstrong is distinguishing stablecoin rewards from traditional bank interest to navigate evolving U.S. regulations. Armstrong argues that while banks engage in fractional-reserve lending by using customer deposits to issue loans, fully reserved stablecoins like USDC are backed by assets such as short-term U.S. Treasuries intended for redemption.

This distinction is central to a policy debate following the enactment of the GENIUS Act in July 2025. The law requires stablecoin issuers to maintain 1:1 reserves and prohibits them from paying interest directly to holders. However, the Act does not explicitly address rewards offered by intermediaries. Coinbase currently provides USDC rewards, ranging from 3.75% to 4.5%, through a revenue-sharing arrangement with Circle, the issuer of USDC. These rewards are funded by the interest earned on the Treasuries backing the reserves.

The banking industry has expressed concern that such programs could lead to significant deposit flight, as consumers might move funds from traditional savings accounts to stablecoins offering higher returns. Armstrong contends that these rewards are fundamentally different from bank interest because they are derived from reserve yields rather than lending profits.