Coinbase CEO Brian Armstrong warned that any attempt to reopen the GENIUS Act would cross a "red line."

Armstrong accused banks of lobbying Congress to block stablecoin rewards and restrict fintech competition.

The GENIUS Act bars stablecoin issuers from paying interest directly but allows platforms and third parties to offer rewards.

Banks want to eliminate this provision.

What Happened

Armstrong responded to Max Avery, a board member at Digital Ascension Group, who outlined banking sector efforts to amend the legislation.

Avery argued proposed changes would ban not just direct interest payments but all "rewards" mechanisms offered by platforms.

Banks currently earn approximately 4% on reserves at the Federal Reserve while paying consumers near zero on savings accounts.

"They're calling it a 'safety concern.' They're worried about 'community bank deposits,'" Avery wrote, adding research shows no evidence of disproportionate outflows from community banks.

"We won't let anyone reopen GENIUS," Armstrong wrote on X.

He predicted banks will eventually lobby to pay interest on stablecoins themselves once they recognize the opportunity.

"It's 100% wasted effort on their part (in addition to being unethical)," he added.

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Why It Matters

The GENIUS Act passed after months of negotiations between lawmakers, banks, and cryptocurrency companies.

Bank lobbying threatens to undo the compromise allowing platforms like Coinbase to offer yield-sharing programs on stablecoins.

Stablecoin platforms compete directly with banks by offering users a share of yields generated from reserves.

This challenges banking's practice of capturing the spread between Federal Reserve rates and consumer deposit rates.

Last week, Representatives Max Miller and Steven Horsford unveiled the Digital Asset PARITY Act to reduce tax burdens on cryptocurrency users.

The proposal would exempt regulated stablecoin transactions under $200 from capital gains taxes and allow five-year deferrals on staking and mining reward income.

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