Coinbase Presses Treasury To Heed Congressional Intent On GENIUS Act Amid TradFi Pressure

Coinbase has urged the US Treasury Department to stick to Congress’s vision for the GENIUS Act, suggesting that caving in to pressure from traditional financial institutions could stifle stablecoin innovation.

In its response to the Treasury’s request for comments, Coinbase said regulators must avoid “imposing any requirements that go beyond what the statute commands.”

It argued that Congress “carefully drafted” the GENIUS Act to promote responsible growth in stablecoins, strengthen US crypto leadership, and modernize payments infrastructure.

Banking groups have called on regulators to close what they view as a “yield loophole” that allows firms like Coinbase to offer returns on Circle’s USDC holdings through third parties.

Coinbase says that expanding the ban on stablecoin yields would “rewrite Congress’s carefully-drawn lines,” hurting consumers and curbing innovation by removing market incentives that lower costs and drive adoption.

The exchange also urged Treasury to coordinate with other regulators to avoid overlapping rules that could fragment the market.

“GENIUS is among a handful of federal efforts to provide clarity in digital asset markets, so Treasury must be mindful not to conflict with ongoing efforts of Congress or other federal regulators,” Coinbase wrote.

Banking Lobby Groups Unhappy Stablecoin Firms Are Circumventing Yield Ban

The GENIUS Act provided the digital asset market with some long-awaited regulatory clarity. It establishes a regulatory framework for stablecoin firms looking to issue their tokens in the US, and focuses on classifying “payment stablecoins,” how they may be regulated, and who may issue them.

One of the main requirements listed in the GENIUS Act is that permitted issuers maintain a 100% reserve backing of outstanding stablecoins with highly liquid assets such as US dollars or short-term US Treasuries. The firms also need to provide monthly disclosures of reserve composition, as well as annual audited financial statements. 

There is also a ban on stablecoin firms offering their token holders yield directly, but this prohibition has not been expanded to third parties or affiliates.

That, according to banking lobby groups, paves the way for stablecoin firms to get around the ban, as has been the case with Coinbase offering a yield on USDC.

Coinbase USDC yield offering (Source: Coinbase)

Regulators In Other Parts Of The World Working On Stablecoin Regulation

As the US Treasury Department looks to implement the GENIUS Act, regulators from other parts of the world have signalled that they are working on their own regulatory frameworks for stablecoins. 

Canada recently unveiled plans for a stablecoin regulatory framework in its 2025 federal budget. Similar to the GENIUS Act, Canada’s framework will require stablecoin firms to maintain adequate reserves. 

Meanwhile, Bank of England Deputy Governor Sarah Breeden recently said she expects the UK to keep pace with the US when it comes to regulating the $306 billion stablecoin market. 

Stablecoin market cap (Source: DefiLlama)

She also stressed the importance of the US and UK synchronizing when it comes to regulating the rapidly-growing sector. The Bank of England is reportedly expected to issue its stablecoin consultation paper on Nov. 10 as well after speaking with US authorities and agencies.