Coinbase's Defense of Stablecoin Rewards with Conditional Probabilities and Bank Struggles

As regulatory discussions in the crypto market gain new dimensions, Coinbase actively fights against the banking sector to preserve its stablecoin yield program. During this period when the Senate continues its work on the crypto market structure bill, conditional probability calculations reveal how uncertain policy decisions are.

Central Debate in the Legislative Draft

The CLARITY Act and similar regulatory frameworks touch on one of the most sensitive points of the crypto industry: the stablecoin reward mechanism. The bill goes beyond mere disclosure and announcement requirements, aiming to restrict non-bank firms like Coinbase, which are traded on Nasdaq, from offering rewards. In the version supported by some lawmakers, only entities with a banking license would be permitted to offer such programs. This approach is strongly advocated by traditional financial institutions.

Coinbase’s Yield Strategy and Arguments on Bank Revenues

The crypto exchange has developed a model that shares the interest earned on USDC issued by Circle with users. The 3.5% yield offered through the Coinbase One subscription continues to support the company’s revenue stream during market periods when trading volume declines. In the third quarter, this revenue exceeded $355 million, demonstrating how critical this part of the business model is.

Coinbase’s Chief Policy Officer Faryar Shirzad strengthens his arguments by revealing the returns that financial institutions earn. Banks parking approximately $3 trillion at the Federal Reserve earn $360 billion annually from card transaction fees. According to Shirzad, stablecoin rewards pose a real threat to these revenues because they “create authentic competition in payment systems.” Independent research from Cornell University confirms that the adoption of stablecoins does not reduce bank credit. An important point emphasized by Shirzad is that for rewards to significantly impact deposits, they need to reach at least 6%; current proposals do not even approach such a rate.

Banks, on the other hand, present a different perspective. They argue that these rewards divert deposits from the traditional financial system and harm community bank loans used by “small businesses, farmers, students, and homebuyers.” However, Coinbase’s claims and academic findings do not provide strong evidence supporting these concerns.

Conditional Market Assessment: 68% Chance of Passage

Market participants measuring policy uncertainty evaluate the bill’s chances of becoming law this year through conditional probability calculations. Investors on Polymarket estimate a 68% likelihood, while the Kalshi platform raises this figure to 70%. The stablecoin reward disagreement, which weakens bipartisan support, indicates that passage remains far from certain despite the Trump administration’s backing. These conditional scenarios reflect how sensitive policymakers find the issue and the level of concern among market players.

Federal Charter and Reconciliation Scenarios

Some lawmakers offer a practical solution: only firms with a banking license can offer rewards. In December last year, five crypto companies, including Circle, Ripple, and BitGo, received conditional approval to become federally licensed banks. This development points to a cautious compliance pathway.

However, experts note that this approach may not fully resolve the issue. Companies seeking a final solution will likely develop alternative mechanisms to encourage users to hold funds. Coinbase’s resilience and capacity to adapt demonstrate that this strategy can be preserved even if the regulatory environment changes.

The structure of the policymaking process is no longer a simple yes/no matter. Coinbase’s resilient stance proves how vital the stablecoin ecosystem has become for the financial system. The conditional probabilities of the bill further complicate the scenario, highlighting the need for all parties to reassess their negotiating power.