The U.S. Senate Banking Committee is set to mark up its long-awaited market structure legislation next week.
This will reopen debate over whether stablecoin issuers should be allowed to offer rewards — an issue Congress had previously addressed under the GENIUS Act.
The renewed focus on stablecoin rewards has surfaced late in the legislative process. It has introduced uncertainty around a policy area that industry participants believed had already been resolved.
The outcome of the markup could shape how stablecoins compete in payments and onchain commerce as lawmakers finalise the framework governing digital assets.
Stablecoin returns to the agenda
Under the GENIUS Act, Congress established guardrails for stablecoins without prohibiting rewards. This structure was intended to balance consumer protection with innovation in digital payments.
Revisiting the issue as part of the broader market structure bill risks reopening compromises that were reached earlier in the legislative cycle.
The Senate Banking Committee’s markup next week will determine whether provisions restricting rewards are added, removed, or clarified before the bill advances.
Lawmakers have not yet signalled a consensus, raising the prospect of late-stage amendments.
Payments economics at the centre of the debate
Supporters of stablecoin rewards argue that the issue is less about financial stability and more about competition in payments.
In a post, Faryar Shirzad, chief policy officer at Coinbase, warned that reopening the rewards debate could undermine consumer choice as commerce increasingly moves onchain.
Shirzad argued that stablecoins primarily compete with card networks and other payment rails rather than with bank lending.
He pointed to data showing that U.S. banks generate significant revenue from payment-related activities, including card fees and interest on reserves, and framed opposition to rewards as rooted in protecting those revenue streams.
Evidence cited on deposits and lending
The argument that stablecoin rewards could drain deposits from community banks has also been challenged with empirical research.
Shirzad cited a study by Charles River Associates that found no meaningful relationship between growth in USDC and community bank deposits, suggesting the two serve different users and use cases.
Academic research has reached similar conclusions. Studies from Cornell University indicate that stablecoins do not materially reduce bank lending and that rewards would need to approach levels well above current offerings to meaningfully affect deposits.
Current reward rates in the market remain far below those thresholds.
Broader implications for the U.S. dollar
Beyond domestic payments, the debate carries geopolitical overtones.
Shirzad pointed to moves by other jurisdictions, including China’s experimentation with interest-bearing features in its digital yuan, as evidence that restricting rewards could weaken the U.S. dollar’s competitiveness in onchain commerce.
While such arguments are contested, they highlight how stablecoin policy is increasingly viewed through the lens of payments leadership and currency influence, not just crypto regulation.
What happens next
The Senate Banking Committee’s markup will determine whether the market structure bill preserves the GENIUS Act’s treatment of stablecoin rewards or reopens the issue for further negotiation.
Any change could ripple through an industry that has been operating under the assumption of regulatory continuity.
For now, the return of the rewards debate underscores the fragility of late-stage legislative compromises.
As Congress moves to finalise digital asset rules, even previously settled issues remain subject to revision — with implications for how stablecoins are used, priced, and adopted in the U.S. financial system.
Final Thoughts
- The return of the stablecoin rewards debate ahead of next week’s Senate markup highlights how late-stage legislative changes can reintroduce regulatory uncertainty, even on issues previously addressed by Congress.
- How lawmakers handle rewards could shape competition in digital payments, influencing whether stablecoins evolve as consumer-facing payment tools or remain more limited instruments.
