$6.6 Trillion Deposit War Erupts

A potential ban on third-party stablecoin rewards could disrupt the crypto market, sparking fierce debate among financial leaders.

Story Overview

The GENIUS Act currently allows third-party platforms to provide stablecoin rewards.
The CLARITY Act seeks to close this perceived loophole, threatening $6 billion in crypto incentives.
Coinbase may withdraw support for the CLARITY Act if the ban is implemented.
Banks argue that these rewards undermine community lending by siphoning deposits.

GENIUS Act and Its Impact

The GENIUS Act, enacted in July 2025, prohibits stablecoin issuers from paying interest directly to holders, marking a significant regulatory move to protect consumers. However, it left room for third-party platforms, like crypto exchanges, to continue offering rewards. This has been a key factor in the growth of stablecoins, as it mirrors traditional banking incentives but within the digital currency space.

Banking Sector’s Concerns

Banking trade associations, including the American Bankers Association, have expressed concerns that stablecoin rewards offered by third parties threaten community banking by enticing deposits away from traditional banks. They argue that these incentives could potentially lead to a $6.6 trillion shift in deposits, destabilizing local lending practices essential for small businesses and agricultural communities.

In early January 2026, these associations issued a joint letter urging Congress to pass the CLARITY Act, which would extend the GENIUS ban to all forms of inducements through affiliates or platforms, effectively closing the loophole that allows for third-party rewards.

Crypto Industry’s Response

The crypto industry, led by the Blockchain Association and major firms like Coinbase, has pushed back against these proposed changes. They argue that the ability to offer rewards is crucial for fostering innovation and competition. Proponents emphasize that these incentives do not pose a proven threat to bank deposits, as alleged by banking groups.

Coinbase has signaled its potential withdrawal of support for the CLARITY Act, should it move forward with the proposed ban. The Senate Banking Committee is scheduled to discuss this legislation on January 15, 2026, marking a pivotal moment for the future of stablecoin rewards.