Major banking associations are aggressively lobbying U.S. Congress to extend a ban on stablecoin rewards, aiming to protect an estimated $360 billion in annual revenue derived from Federal Reserve interest payments and card swipe fees. The American Bankers Association (ABA), joined by 52 state banking associations and the Independent Community Bankers of America (ICBA), sent a letter to lawmakers on January 6, 2026, urging them to close what they call a "loophole" in the GENIUS Act.
The GENIUS Act, signed into law in July 2025, prohibits payment stablecoin issuers from paying interest or yield "directly or indirectly." However, cryptocurrency exchanges like Coinbase have implemented affiliate reward programs, treating payouts as loyalty incentives rather than interest. Banking groups argue these programs violate the spirit of the law and are pushing for clarifying language in upcoming market structure legislation to explicitly ban "rewards routed via affiliates."
The core of the conflict lies in two massive, low-risk revenue streams for traditional banks. First, banks hold approximately $2.9 trillion in reserve balances at the Federal Reserve, earning $176.8 billion in interest in 2023. Second, card swipe fees generated $187.2 billion from $11.9 trillion in purchase volume in 2024, costing U.S. households nearly $1,400 each on average. Stablecoins with competitive yields threaten both streams by offering users a direct claim on Treasury bill yields and enabling cheaper on-chain payments that bypass card networks.
Research commissioned by Coinbase from Charles River Associates, analyzing data from 2019 to 2025, found no statistically significant relationship between the growth of stablecoins like USDC and community bank deposits. Even under extreme assumptions, community banks would lose less than 7% of deposits. Cornell University researchers similarly concluded rewards would need to approach 6% to meaningfully affect deposits, while current programs offer 1% to 3%.
The potential financial impact is substantial. If stablecoins captured just 5% of U.S. card purchase volume, it would displace $9.3 billion in annual merchant fees—revenue lost to banks. Furthermore, with the total stablecoin market cap at roughly $307.6 billion, reward programs paying 1.5% to 2.5% distribute $4.6 billion to $7.7 billion annually to users. Should the market cap grow to $1 trillion, annual user payouts could reach $15 billion to $25 billion.
Pro-crypto advocates, including lawyer John Deaton, warn that a U.S. ban on rewards creates a "national security trap," especially as China plans to pay interest on its digital yuan. The policy decision now before Congress is whether to interpret the GENIUS Act narrowly (applying only to issuers) or broadly (extending to affiliates), a choice that will determine if stablecoins can compete with traditional banking products or if incumbent margins will be protected.
