CEO Coinbase warns of a "red line" if the GENIUS Act is reinstated, accuses banks of political pressure

Coinbase CEO, Brian Armstrong, warns that any attempts to reopen the GENIUS Act will cross a “red line.” He accuses banks of leveraging political pressure to stifle competition from stablecoins and fintech platforms.

In a post on X on Sunday, Armstrong said he was “really impressed” that banks could openly lobby Congress to such an extent with little pushback. At the same time, he affirmed that Coinbase will firmly oppose any efforts to amend the law: “We will not let anyone reopen GENIUS.”

Armstrong predicts that within a few years, banks will “do a 180” and start lobbying to be allowed to pay interest and yields on stablecoins when they realize the scale of the opportunity ahead. “Their current actions are 100% a waste — not to mention unethical,” he emphasized.

The GENIUS Act, passed after months of negotiations, bans stablecoin issuers from paying interest directly, but still allows platforms and third parties to implement other forms of rewards.

Bank lobbying activities targeting stablecoin “rewards”

Armstrong’s comments were made in response to a post by Max Avery — a board member and Business Development Director at Digital Ascension Group — explaining why some in the banking industry are increasing lobbying efforts to urge lawmakers to reconsider the law.

"Exactly. I’m truly impressed that banks can lobby for this issue so openly and seriously, to the point where they can freely walk in and out of senators’ offices without facing strong reactions. That requires an incredible level of strategic thinking and political finesse.

We will not accept any efforts to reopen the GENIUS Act. This is a “red line” for us. Coinbase will continue to stand up for customer rights and the future of the entire cryptocurrency industry.

I believe that within a few years, banks will be forced to change their stance and lobby themselves to be allowed to pay interest and share profits from stablecoins — once they realize the enormous opportunity this sector offers. From that perspective, their current efforts are not only futile but also unethical.

The paradox of innovation — when the leaders try every way to suppress the new until it surpasses them — is still repeating itself painfully."

According to Avery, the proposed amendments not only ban stablecoin issuers from paying interest directly to users but also expand the scope to tighten the concept of “rewards.” He believes this approach would neutralize mechanisms for sharing yields indirectly through intermediary platforms or third parties.

Avery emphasizes the imbalance in the current model: banks earn about 4% yield from reserves deposited at the (Federal Reserve), while consumers receive almost no significant benefit from traditional savings accounts. He argues that the ability to share a portion of the yield with users has made stablecoin platforms a threat to this business model.

“They call it a ‘safety concern.’ They say they are worried about ‘community bank deposits,’” Avery wrote, citing independent studies showing “no evidence that deposit flows are being disproportionately withdrawn from community banks.”

US lawmakers propose tax cuts for stablecoin payments

Last week, US lawmakers announced a draft discussion bill aimed at significantly reducing the tax burden for cryptocurrency users in everyday transactions. The proposal focuses on exempting capital gains tax on small-value stablecoin transactions, encouraging the use of cryptocurrencies as a practical means of payment. Sponsored by Representatives Max Miller and Steven Horsford, the bill would allow stablecoin payments managed and pegged to USD, with a maximum value of $200, without recognizing gains or losses for tax purposes.

Beyond payments, the draft also extends to tax issues related to staking and (mining) activities. Taxpayers could defer recognizing income from rewards for up to five years, providing additional financial flexibility for individuals and businesses participating in the crypto ecosystem.