Coinbase’s Faryar Shirzad warns banning stablecoin rewards as part of the Clarity Act would drive issuers offshore, and hand the dollar’s digital future to rival jurisdictions
The fight over stablecoin rewards has become one of the primary obstacles to advancing the Digital Asset Market Clarity Act through the US Senate. Banking lobbyists have pushed for an outright ban on all forms of yield, arguing that reward programmes function as deposit substitutes that draw capital away from the banking system.
Their argument has stalled the bill so far, and with the Senate’s working calendar effectively closing at the end of July ahead of midterm campaigning, the window for passing the CLARITY Act is becoming narrower.
Into that standoff, Faryar Shirzad, Coinbase‘s Chief Policy Officer, has said stablecoin rewards may go as far as to determine whether or not a dollar-denominated stablecoin ecosystem even takes root.
“[There are] lots of questions about why rewards matter and why we need to keep the competitiveness of GENIUS stablecoins,” Shirzad wrote on X.
“The answer is that you don’t have to issue a US dollar stablecoin in the US. Hong Kong, Singapore, UAE, Bermuda and others have built licensing regimes specifically to attract USD stablecoin issuers — the jobs, the reserves, the infrastructure, the dollar rails and the governmental oversight.
“Rewards are critical to make US-regulated stablecoins competitive with offshore alternatives. Strip them from GENIUS, and you’re undermining demand for the very product Congress is trying to promote and bring on-shore.”
Behind the Clarity Act rift
Signed into US law in July 2025, one of the GENIUS Act’s initial tenants was to prohibit permitted stablecoin issuers from paying interest or yield directly to holders.
However, what it left unresolved was whether the prohibition extended to third-party trading platforms like Coinbase, which offers its own rewards programmes on stablecoins issued by others.
Crypto-trading platforms acted on the assumption that it did not, despite the views of the banking industry. In January 2026, the Senate Banking Committee‘s initial draft of the Clarity Act reflected a compromise, where digital asset service providers would be barred from paying yield on static holdings but permitted to offer activity-based rewards tied to transactions, wallet use, or ecosystem participation.
Banking representatives remained opposed to this, though, and arrived at a White House meeting in February with a principles document calling for a near-total ban on stablecoin yield. They have not yet moved from that position.
The crypto industry’s negotiating position was further complicated in late February when the Office of the Comptroller of the Currency (OCC) published proposed rulemaking implementing the GENIUS Act, introducing a rebuttable presumption that affiliate and third-party yield arrangements may violate the spirit of the law, casting doubt on whether even the existing framework protects Coinbase’s rewards programmes.
As of 10 March 2026, senators were still working toward a stablecoin yield compromise with a Senate Banking Committee markup potentially scheduled for mid-to-late March 2026.
The importance of stablecoin-related revenue is important for Coinbase, it represented close to 20% of Coinbase’s total revenue in the third quarter of 2025, and helped it weather an otherwise volatile crypto market. Regulatory enforcement on its rewards programme, could, understandably affect future stablecoin-related revenue.
Research published in January 2026 for ProMarket by David Krause, Emeritus Associate Professor of Finance in the College of Business Administration at Marquette University, found that Coinbase’s USDC reward rates exhibit a 98.7% correlation with three-month Treasury bill yields, meaning rewards function as a near-direct pass-through of returns on sovereign debt, not a promotional add-on.
The offshore alternative is not hypothetical
The economic logic outlined by Krause is perhaps why Shirzad argues that stripping rewards from US-regulated stablecoins makes them less attractive than offshore alternatives, and in doing so, the Senate could be risking pushing the stablecoin issuance infrastructure – the reserves, the jobs, the regulatory oversight – out of American hands entirely.
Hong Kong, Singapore and the UAE have each moved aggressively to attract stablecoin issuers, building licensing regimes that offer regulatory clarity, reserve frameworks and commercial infrastructure for USD stablecoin activity.
It should be noted the competition is not predicated on being more permissive on rewards – Hong Kong’s Stablecoins Ordinance, for instance, explicitly prohibits licensed issuers from paying interest or yield to holders, mirroring the GENIUS Act’s own restrictions.
Shirzad’s point is perhaps broader, that if US-regulated stablecoins are made less commercially attractive through a blanket ban on third-party rewards, issuers have an incentive to incorporate in jurisdictions where the overall regulatory environment is more welcoming – taking the reserves, the infrastructure and the oversight with them.
He says: “Dollar dominance isn’t just about who uses the dollar. It’s about who issues and controls it. The Senate shouldn’t shackle US-regulated stablecoins while the rest of the world rolls out the welcome mat.”
However, it’s worth noting the banking lobby’s counter-position rests on numbers that are hard to dismiss. A US Treasury Department advisory council has estimated the US transactional deposit market at $6.6tn, with Citigroup projecting stablecoin balances could reach between $1.9tn and $4tn by 2030.
Banks regard that trajectory as an existential threat to their deposit base, and enough senators on both sides of the aisle have found that argument persuasive to keep the Clarity Act stalled.
