Banks vs Crypto: Stablecoin Rewards Emerge as a New Regulatory Battleground

A quiet but consequential policy battle is unfolding in Washington, placing stablecoin rewards at the center of a growing conflict between traditional banks and crypto companies. More than 125 crypto firms, including major exchanges such as Coinbase, Kraken, and Gemini, have jointly sent a letter to Congress warning against renewed attempts to narrow provisions of the GENIUS Act.

According to the coalition, traditional banks are lobbying lawmakers to reinterpret or restrict stablecoin reward programs under the guise of risk management. Crypto firms argue that this effort is less about financial safety and more about protecting incumbent institutions from competition.

Gemini co-founder Tyler Winklevoss described the move as an attempt to reopen a debate that lawmakers had already settled. In his view, banks are using regulatory pressure to undermine how crypto platforms attract and retain users, rather than addressing genuine systemic risks.

At the heart of the dispute lies the design of the GENIUS Act itself. The legislation intentionally separates stablecoin issuers from the platforms that distribute them. Issuers are prohibited from paying interest, a safeguard meant to prevent bank-like risk. Platforms, however, are permitted to offer rewards funded from their own revenues. Crypto firms insist this distinction is deliberate and essential.

The coalition compares stablecoin rewards to familiar consumer incentives such as credit card cash-back programs, which operate without banks paying interest on deposits. From their perspective, restricting crypto platforms while allowing banks to continue similar reward schemes exposes a clear inconsistency in regulatory treatment.

The timing of the dispute adds another layer of tension. U.S. banks are increasingly signaling plans to launch their own stablecoins, raising concerns that regulatory pressure is being used as a competitive weapon rather than a tool for consumer protection.

For users, rewards are not a minor feature. Traditional checking and savings accounts offer minimal yields, while stablecoin platforms often provide significantly higher returns. Crypto companies argue that removing these incentives would reduce the appeal of digital dollars just as adoption is accelerating.

The letter, organized by the Blockchain Association, warns that reopening the GENIUS Act would inject uncertainty into a sector that depends on regulatory clarity. Such ambiguity, the group says, could slow innovation, deter investment, and delay mainstream stablecoin adoption at a critical stage.

While banking groups have yet to issue a formal response, the message from the crypto sector is clear. Stablecoin rewards are a core element of the current regulatory framework, and the industry is prepared to defend them. The outcome of this battle may help determine whether U.S. crypto regulation ultimately favors competition and innovation—or reinforces the dominance of legacy financial institutions.