Some leading exchanges may withdraw their support for the CLARITY bill if it restricts stablecoin rewards.

Source: Cryptonews Original Title: Coinbase may withdraw CLARITY Act support if it bans stablecoin rewards Original Link: A leading exchange is sending a clear signal to the U.S. Congress: if the CLARITY Act restricts stablecoin rewards, the exchange may withdraw support for this major crypto asset market structure bill.

Stablecoin Rewards Become a Controversial Focus

According to informed sources, a major exchange has informed U.S. lawmakers that if the CLARITY Act limits stablecoin rewards outside of basic disclosure rules, it may withdraw support. The exchange considers this issue critical to its business and the competitiveness of the stablecoin market.

Core Interest: The ability of a leading exchange to offer stablecoin balance rewards, especially for USD Coin (USDC). The exchange shares interest income generated from USDC reserves with Circle and uses part of this income to incentivize users, including offering approximately 3.5% rewards to some premium users.

These incentives encourage users to hold stablecoins on the platform, providing a stable income stream, especially during periods of lower trading activity. It is estimated that the exchange’s revenue related to stablecoins could reach about $1.3 billion by 2025.

If rewards are restricted, users holding USDC may reduce their holdings, putting this revenue at risk. The exchange also holds a minority stake in Circle, further deepening its exposure to the stablecoin economy.

Some proposals circulating in Washington suggest restricting stablecoin rewards to regulated banks or financial institutions. Banking lobbying groups support this plan, arguing that yield-bearing stablecoin accounts could divert traditional bank deposits and reduce loans to households and small businesses.

Background of the GENIUS Act

This debate arose after the passage of the GENIUS Act in July, which created the first federal framework for stablecoin issuers. The law prohibits issuers from paying interest or yields solely related to holding stablecoins but does not ban third-party platforms from offering rewards to users.

Crypto companies say this distinction is intentional. A senior executive at a leading exchange argued that banning platform rewards would overturn the compromise already reached in the GENIUS Act and favor banks.

The company also views rewards as a way to strengthen the role of the dollar in global digital finance, especially as other countries explore interest-bearing digital currencies.

Rising Political Pressure

Political pressure around the bill continues to intensify. The crypto industry has been one of the largest corporate political spenders in the 2023-2024 election cycle, with a leading exchange being a significant donor. The threat of withdrawing support carries weight with lawmakers seeking broader market structure reforms.

However, the final outcome remains uncertain. Some senators are considering a compromise that would only allow companies with banking or trust licenses to offer rewards. Several crypto firms have received conditional approval to operate as national trust banks, but these approvals face opposition from banking industry groups.

Currently, stablecoin rewards have become a key issue that could slow or even block the legislation. Analysts warn that if bipartisan support further weakens, the likelihood of the bill passing this year could significantly decline.