Coinbase Challenges Banks as Stablecoin Rewards Face CLARITY Act Fight

Faryar Shirzad, chief policy officer at Coinbase, has pushed back against arguments from the American Bankers Association (ABA) that certain stablecoin reward provisions in the CLARITY Act need to be changed. 

In a CoinDesk opinion piece published Wednesday, Shirzad said available data does not support claims that such rewards would drain deposits from community banks or reduce local lending.

The exchange follows an earlier opinion article by Rob Nichols, president and chief executive of the American Bankers Association. Nichols wrote that the association seeks to strengthen the CLARITY Act rather than block it, identifying a short provision in the roughly 600-page bill that he said needs clarification. 

The ABA’s concern centers on whether platforms could offer rewards that function similarly to interest on stablecoin balances, potentially drawing funds away from traditional bank deposits that support local lending.

Community bank deposits continued to grow

Shirzad pointed to deposit trends since stablecoin rewards became available. 

He noted that Coinbase has paid rewards on USDC for more than four years under existing law. According to the figures he cited, community bank deposits grew 26%, or roughly $482 billion, between June 2019 and March 2026. That period covers the rise of stablecoins and the introduction of related reward programs.

Shirzad also referenced empirical studies from Charles River Associates and the Council of Economic Advisers that found no significant relationship between stablecoins and bank deposits. 

He argued that the absence of measurable deposit flight during this multi-year period provides relevant evidence, although regulations implementing the GENIUS Act are not yet complete.

Rewards and interest remain a point of disagreement

The ABA has proposed language changes that would more clearly prohibit rewards resembling interest while allowing certain incentive programs. Nichols has described the requested edits as limited and intended to prevent stablecoins from functioning as interest-bearing deposits.

Shirzad countered that the current text of the CLARITY Act reflects months of bipartisan negotiation involving the banks. He said the language distinguishes between returns for simply holding idle balances and compensation tied to genuine activity. 

In his view, the proposed revisions could extend the prohibition beyond deposit substitutes to some stablecoin payment and settlement mechanics, creating new ambiguity for regulators and courts.

Shirzad compared the issue with credit-card rewards, which are widely used by the banking industry. He cited nearly $50 billion in consumer rewards in the most recent year referenced, with more than 90% of general-purpose card spending occurring on cards that offer rewards.

Stablecoins can serve functions including payments, trade settlement and collateral, he argued, making their incentive structures different from those of traditional deposit products.

Coinbase files comments on perpetual derivatives rules

The stablecoin debate comes alongside Coinbase’s separate work on U.S. derivatives regulation.

Coinbase has submitted a formal response to a joint request for comment from the Commodity Futures Trading Commission (CFTC) and the Securities and Exchange Commission (SEC). The filing addresses definitions of swaps and security-based swaps, along with alternative compliance options for perpetual derivatives.

Shirzad noted the submission on August 25, saying Coinbase was seeking clearer product definitions and less jurisdictional overlap. The letter was signed by Scott Bauguess, vice president of global regulatory policy, and Julia Hueckel, director of global regulatory policy.

Coinbase argues CLARITY Act could expand bank powers

Shirzad also argued that the CLARITY Act would grant banks the broadest new statutory authorities in digital assets since the Gramm-Leach-Bliley Act of 1999. These include powers related to custody, staking, lending, payments, clearing, and market-making. 

He said community banks stand to gain particularly from shared blockchain infrastructure, which could allow smaller institutions to compete on global payments while continuing to underwrite local businesses and mortgages.

The legislation, he argued, would also support broader demand for the U.S. dollar and Treasury securities by establishing a regulated framework for dollar-denominated stablecoins. Both Shirzad and Nichols have expressed the view that the United States can serve as both a leading banking center and a center for digital-asset activity.

Armstrong urges Senate action on CLARITY Act

Coinbase CEO Brian Armstrong has also called for passage of the legislation.

In a post on X on Saturday, he noted that most G20 countries already have frameworks for crypto trading, while the U.S. remains an exception despite its status as the world’s largest financial market. Armstrong urged the Senate to pass the CLARITY Act when lawmakers return to the issue in September, specifically calling for action on September 15. 

His comments come as the market-structure bill faces a critical legislative test and U.S. regulators prepare alternative approaches if Congress does not advance the legislation.

For now, the disagreement between Coinbase and the ABA centers on whether stablecoin rewards tied to activity could compete with traditional bank deposits. Shirzad points to deposit-growth data and studies he says do not show significant deposit displacement, while the banking group argues that the legislation should more clearly distinguish permitted incentives from interest-like payments.

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