If lawmakers end up banning stablecoin rewards under the CLARITY bill, Coinbase (COIN) could lose a tool it uses to incentivize users to hold digital dollars on its platform — although analysts say the impact on the exchange’s business could be limited.
As lawmakers debate the future of stablecoin regulation in Washington, one unresolved question in the CLARITY bill could have significant implications for Coinbase and the business model of other stablecoin partners: whether companies will be allowed to share yield with stablecoin holders.
The bill, stalled in Congress since January, aims to establish a regulatory framework for stablecoins – digital tokens typically pegged to the US dollar. A central point of contention is whether crypto companies should be allowed to pass on the yield earned to the reserves backing these tokens. Banks and some lawmakers have pushed to ban interest payments, while crypto companies including Coinbase have argued that restricting rewards would harm the utility and competitiveness of stablecoins.
However, this week DC had a glimmer of hope. One possible deal could be for stablecoin issuers and their partners to change the language of their offerings to make them distinct from bank deposits, Sen. Cynthia Lummis said Wednesday.
Read more: Key US senator on negotiating crypto market structure bill: ‘We think we got it’
Nonetheless, for Coinbase, the issue is important as stablecoins, particularly USD Coin (USDC), have become an important source of revenue and user engagement.
Under the current draft of the CLARITY Act, stablecoin issuers would be prohibited from paying interest directly to holders. But according to an industry source familiar with the legislation who wished to remain anonymous, 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 stable coin yields that the genie is kind of out of the bottle already,” the source told CoinDesk. Although 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 line between “interests” and “rewards” is thin, the source added. Marketing incentives or loyalty programs could effectively replicate the economic impact of yield while remaining technically compliant. This echoes similar debates around the orientations linked to the GENIUS law, where the border between the restriction of yield and the way in which it can be distributed by partners remains blurred.
Another provision of the bill could further complicate its application. The legislation contains an exclusion for activity-related payments, meaning that yield could potentially be distributed if a stablecoin is used in transactions, lending, or other financial activities. In practice, this could allow structures in which stablecoins are routed through decentralized financial protocols to generate returns before those rewards are passed on to users.
Even partnerships between issuers and exchanges could potentially achieve a similar result. For example, an issuer could earn a return on Treasury reserves, share some of that revenue with an exchange partner, and have the exchange distribute rewards to users — an arrangement that regulators say could constitute avoidance but is not explicitly prohibited in the current form of the bill.
“It feels like even a mediocre marketer could come up with multiple creative structures that would conform,” 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 yield is just one of many ways the company attracts users to its platform.
“It’s important, but it’s not even close to existential,” Lau said. Coinbase already generates revenue through trading, derivatives, and its Base blockchain ecosystem, and many users come to the platform for services beyond stablecoin rewards.
In 2025, trading revenue remained the exchange’s primary source of revenue, although revenue from stablecoins grew exponentially from the previous year, bringing in $1.35 billion in 2025 compared to $910 million in 2024, making it the second largest revenue driver, according to a recent filing.
Coinbase, however, has a slightly different take on this debate.
“Ironically, if a ban on crypto rewards were passed, it would make us more profitable since we pay out large amounts in rewards to our customers holding USDC,” Brian Armstrong, CEO of Coinbase, wrote in an article on X in February. “But we don’t want that to happen, it’s better for customers to get rewards, and it’s better for the United States to keep regulated stablecoins competitive on the global stage.”
Stablecoin incentives, however, play a strategic role.
Clear Street’s Lau said Coinbase benefits when customers hold USDC on its platform because the company can capture the entire yield generated by the reserves backing the token. If users move these assets to external wallets or decentralized platforms, Coinbase may receive only a portion of these revenues.
“If they can’t incentivize customers enough, these people could push USDC away from Coinbase wallets,” Lau said, which could reduce the company’s share of stablecoin revenue.
At the same time, the short-term financial impact may be limited. Lau noted that Coinbase largely passes on the coins’ stable yield to users, meaning income is often offset by expenses.
“From a profit perspective, it doesn’t 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 these programs to encourage customers to hold and use USDC on its platform, which could lead to a higher market cap for the stablecoin and increase the revenue Coinbase shares with Circle.
For now, the outcome remains uncertain as lawmakers continue to negotiate the bill’s language.
But even if strict yield limits survive, analysts and industry players say crypto companies will likely adapt, ensuring stablecoins remain a competitive part of the digital payments ecosystem.
Coinbase shares are down about 12% year to date, while bitcoin is down 19%.
