If lawmakers ultimately ban stablecoin rewards under the proposed CLARITY Act, Coinbase ( COIN ) could lose a tool it uses to attract users to hold digital dollars on its platform — though analysts say the impact on the exchange’s business could be limited.
As lawmakers debate the future of stablecoin regulation in Washington, an unresolved issue in the proposed CLARITY Act could have significant implications for the business model of Coinbase and other stablecoin partners: whether companies will be allowed to share profits with stablecoin holders.
The bill, which has been stalled in Congress since January, seeks to establish a regulatory framework for stablecoins – digital tokens typically pegged to the US dollar. A key point of contention is whether crypto companies should be allowed to pass through the dividends earned on the reserves backing these tokens. Banks and some lawmakers have pushed to ban interest payments, while crypto companies including Coinbase have argued that limiting rewards would undermine stablecoins’ utility and competitiveness.
But this week there was a glimmer of hope from DC. One possible deal could be for stablecoin issuers and their partners to adjust the language of their offerings to make them sound separate from bank deposits, Sen. Cynthia Lummis said Wednesday.
Read more: Key US Senator on Crypto Market Structure Bill Debate: ‘We Think We’ve Got It’
For Coinbase, the issue remains important because stablecoins, especially USD Coin (USDC), have become an important source of revenue and user engagement.
Under the CLARITY Act’s current draft, stablecoin issuers would be barred from paying interest directly to holders. But according to an industry source familiar with the legislation, who did not want to be named, the language leaves room for alternative structures that could still allow rewards to reach users.
“There are so many loopholes in the CLARITY Act when it comes to stablecoin dividends that the genie is already a little out of the bottle,” the source told CoinDesk. Although the bill prohibits issuers from paying interest, it does not clearly prohibit exchanges or platforms from distributing incentives such as discounts, credits or other rewards.
The distinction between “interest” and “rewards” is thin, the source added. Marketing incentives or loyalty programs can effectively replicate the financial impact of dividends while remaining technically compliant. It mirrors similar debates surrounding guidance attached to the GENIUS Act, where the line between limiting the proceeds and shaping how they can be distributed through partners remains unclear.
Another provision in the bill may further complicate enforcement. The legislation includes an exemption for activity-linked payments – meaning returns can potentially be distributed if a stablecoin is used in transactions, lending or other financial activity. In practice, it could allow structures where stablecoins are routed through decentralized finance protocols to generate returns before those rewards are passed on to users.
Even partnerships between issuers and exchanges could potentially achieve a similar result. For example, an issuer could earn returns on Treasury reserves, share some of those revenues with an exchange partner and have the exchange distribute rewards to users — an arrangement that regulators have warned could constitute evasion but is not explicitly prohibited in the bill’s current form.
“It feels like even a mediocre marketing professional could come up with multiple creative structures that would be compatible,” the source said.
Not ‘existential’
Wall Street analysts say the debate has implications for Coinbase, but is unlikely to threaten the company’s broader business model.
Owen Lau, an analyst at Clear Street, said the ability to share stablecoin profits is just one of many ways the company is attracting users to its platform.
“It’s important, but it’s not even close to existential,” Lau said. Coinbase already generates revenue from trading, derivatives and its Base blockchain ecosystem, and many users come to the platform for services beyond stablecoin rewards.
In 2025, transaction revenue remained the exchange’s main source of revenue, although stablecoin revenue had increased exponentially from the previous year, bringing in $1.35 billion in 2025 compared to $910 million in 2024, making it the second largest driver of revenue, according to a recent filing.
However, Coinbase has a slightly different take on this debate.
“Ironically, if a ban on crypto-rewards was enacted into law, it would make us more profitable as we pay out large amounts of rewards to our customers with USDC,” Coinbase CEO Brian Armstrong wrote in a post on X in February. “But we don’t want this to happen, it’s better for customers to get rewards and it’s better for the US to keep regulated stablecoins competitive on a global stage.”
However, stablecoin incentives play a strategic role.
Clear Street’s Lau said Coinbase benefits when customers keep USDC on its platform because the company can capture the full share of dividends generated by the reserves backing the token. If users move these assets to external wallets or decentralized platforms, Coinbase may only receive a portion of this revenue.
“If they can’t provide enough incentive to customers, these people may move USDC away from Coinbase wallets,” Lau said, which could reduce the company’s share of stablecoin-related revenue.
At the same time, the economic impact may be limited in the short term. Lau noted that Coinbase largely passes the stablecoin dividend on to users, meaning that revenue is often offset by expenses.
“From an earnings perspective, it doesn’t actually change much,” he said, adding that the bigger question is whether restrictions could slow the long-term growth of USDC adoption.
If the final rules allow activity-based rewards or loyalty-like incentives, Lau said Coinbase could still use those programs to encourage customers to hold and spend USDC on its platform, potentially driving higher market capitalization for the stablecoin and increasing revenue Coinbase shares with Circle.
For now, the outcome is uncertain as lawmakers continue to negotiate the bill’s language.
But even if strict limits on dividends survive, analysts and industry participants say crypto companies are likely to adapt, ensuring that stablecoins remain a competitive asset in the digital payments ecosystem.
Shares of Coinbase are down about 12% year-to-date, while bitcoin is down 19%.
