In written feedback to the U.S. Department of the Treasury, Coinbase urges exclusion of non-financial software, blockchain validators and open-source protocols from regulation, and seeks clarity that the GENIUS Act’s interest ban applies only to issuers—not intermediaries.
Coinbase submitted detailed feedback to the U.S. Treasury as the agency advances rule-making under the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins). The crypto exchange urged regulators to strictly follow the intent of Congress, arguing that non-financial software providers, blockchain validators and open-source protocol developers should not be swept into the “digital asset service provider” definition. Coinbase also pressed for regulatory clarity that the Act’s ban on interest payments applies solely to stablecoin issuers, not intermediaries who offer user rewards. It further recommended treating payment-stablecoins as cash-equivalents for tax and accounting purposes
What Coinbase’s submission says
According to the comments publicly filed by Coinbase with the Treasury, the firm makes several key points:
- Coinbase argues that the definition of “service provider” in the GENIUS Act should exclude non-financial software companies, blockchain validators and open-source protocol developers—highlighting that such entities enable infrastructure but do not themselves hold assets, extend credit or accept deposits.
- On the interest-ban issue, Coinbase explains that “interest on stablecoin liabilities” is explicitly restricted under the Act for issuers, but that intermediaries (such as trading platforms) offering rewards do not constitute interest and thus should be treated differently. This mirrors arguments reported in industry media of a “loophole” in the law.
- The company recommended that payment-stablecoins—tokens used primarily for settlement, payments or store of value with minimal yield risk—be treated as cash-equivalents for tax and financial-reporting purposes. This, it argues, would align with their functional role and foster adoption by traditional finance (TradFi) participants.
- Coinbase emphasises the need for rule-making to respect congressional intent and not expand the reach of regulation beyond what lawmakers envisioned, in order to promote innovation and avoid unintended consequences for open-source protocol developers and infrastructure providers.
Regulatory context
The GENIUS Act, which became law in July 2025, created the first federal regulatory framework in the U.S. for dollar-backed stablecoins. Among its main provisions: full-backing of stablecoins with high-quality liquid assets, prohibition on stablecoin issuers paying interest, enhanced audit and disclosure requirements, and federal/state supervision.
However, confusion has arisen in the market over how the “interest ban” clause applies to intermediaries and platforms that offer “rewards” or “yield” programmes tied to stablecoin-holdings. Some banking groups argue such programmes undermine the law’s intention of preserving stablecoins as payment instruments rather than deposit substitutes.
Coinbase’s comments come as the U.S. Treasury and banking regulators begin drafting detailed rules and guidance to implement the Act.
Why it matters
- For crypto firms and infrastructure providers, how the “service provider” definition is interpreted will determine whether open-source protocols, validators and software firms are subject to heavy regulatory burdens.
- On the stablecoin interest/yield debate, financial institutions and the crypto industry are watching closely, because how rules are written may impact reward programmes, platform design and deposit-flight risks from banks.
- If payment-stablecoins are treated as cash-equivalents for tax/accounting, that could lower friction for corporate treasuries and fintechs to integrate stablecoins into payments and treasury workflows.
- Because Congress mandated the GENIUS Act, regulators’ fidelity to legislative intent will be a test of how much flexibility the crypto-finance ecosystem can expect going forward.
What comes next
- The U.S. Treasury, along with the Federal Reserve System and Federal Deposit Insurance Corporation, will begin formal rule-making under the Act, with public comment periods expected.
- Industry participants will submit further responses and try to shape the definition of “digital asset service providers”, the scope of interest prohibition, and how rewards versus interest are distinguished.
- Accounting and tax standard-setters (such as the Financial Accounting Standards Board) may be asked to weigh in on the treatment of payment-stablecoins as cash-equivalents.
- Financial institutions and regulators may monitor deposit flows and yield programmes tied to stablecoins to assess systemic risks flagged by banking associations.
About Coinbase:
Coinbase Global, Inc., headquartered in the U.S., is one of the largest crypto trading platforms by user base and assets under custody. It has a large U.S. institutional business and actively engages with policymakers on digital-asset regulation.
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