Banks’ Opposition to Stablecoin Rewards Lacks Supporting Data, Coinbase Executive Argues

Stablecoin Rewards Do Not Harm Community Banks, Data Shows

A Coinbase executive argues that banks’ concerns about stablecoin rewards draining deposits from community banks are not supported by evidence. Faryar Shirzad, Coinbase’s chief policy officer, says data from the past seven years shows no link between stablecoin rewards and deposit outflows.

Stablecoins are a type of cryptocurrency designed to keep a steady value, often pegged to a traditional currency like the U.S. dollar. Some platforms offer rewards, similar to interest, for holding stablecoins.

The American Bankers Association (ABA) has pushed for changes to the Clarity Act, a proposed U.S. law that would regulate stablecoins. The ABA claims that allowing stablecoin rewards could pull deposits away from community banks, hurting local lending.

Key Arguments Against the Banks’ Case

• Community bank deposits grew 26%, or $482 billion, from June 2019 to March 2026, despite the rise of stablecoin rewards.
• Studies from Charles River Associates and the Council of Economic Advisors found no significant relationship between stablecoins and deposit declines.
• Coinbase has paid stablecoin rewards on USDC, a popular stablecoin, for over four years without visible harm to banks.
• Other financial products, like money market funds and Treasury bills, have offered higher yields than bank accounts for years without emptying them.

Banks’ Proposed Changes to the Clarity Act

The ABA wants to adjust the Clarity Act to restrict stablecoin rewards, arguing that rewards mimic interest payments. Shirzad says the current language was carefully negotiated and draws a clear line: rewards for holding money idle are prohibited, but rewards for activity, like transactions, are allowed.

The ABA’s proposed changes would broaden the restrictions, potentially affecting routine stablecoin uses like merchant rebates. Shirzad calls this an attempt to constrain a competitor in the growing onchain finance space.

What the Evidence Confirms

• Stablecoin rewards have existed for years without causing deposit outflows from community banks.
• Community bank deposits have grown steadily during the period stablecoin rewards were available.
• Independent studies support the lack of harm to traditional banking deposits.

What Remains Unclear

• How regulators will interpret the ABA’s proposed changes if they are adopted.
• Whether the Clarity Act will pass with its current language or be revised.

Why This Debate Matters for Crypto and Banking

The Clarity Act would give banks new powers to engage in crypto-related activities, such as custody, staking, and payments. Community banks could compete globally using blockchain technology, which allows fast and low-cost transactions.

Shirzad argues that stablecoin rewards help drive adoption of onchain finance, where stablecoins serve as the cash equivalent. Restricting rewards could limit competition and innovation in the financial system.

Both sides agree the U.S. can be a leader in both banking and crypto. The outcome of this debate could shape how stablecoins and traditional banking coexist in the future.

Sources

• CoinDesk