Over 125 cryptocurrency companies have joined forces to defend stablecoin rewards programs against banking industry pressure. The letter targets recent efforts by traditional banks to restrict how crypto platforms offer rewards to customers.
Why Crypto Firms Are Defending Stablecoin Rewards
The coalition sent a letter to Congress, urging lawmakers to preserve the GENIUS Act as currently written. Tyler Winklevoss, co-founder of Gemini, criticized what he called banking overreach. He said the banks want to relitigate a settled legislative issue.
The GENIUS Act established a clear framework of stablecoins by separating issuers and intermediary platforms such as crypto exchanges. Due to the law, issuers are not allowed to pay interest, but platforms can provide rewards to users.
The industry claimed this division was not by accident, as it focused on addressing any issue of bank risk, and allowed platforms to compete. It is comparable with the way credit card companies receive rewards despite the fact that banks are not able to impose interest on deposits.
However, banking groups now argue Congress should extend its limitations beyond issuers. According to them, platform rewards have similar risks as issuer-paid interest. However, this opinion is being contested by the crypto coalition.
Why Stablecoin Rewards Are Important To Consumers
The letter emphasized the fact that stablecoin rewards provide actual benefits to consumers. The average checking account offers yields of about 0.07% while savings accounts offer nearly 0.40%. However, stablecoin reward programs provide better returns. Gemini revealed that it was in alliance with other giants such as Coinbase and Kraken.
With U.S. banks nearing stablecoin issuance, it indicates that the banks actors also pursuing regulatory avenues. The letter to leaders in the Senate Banking Committee was coordinated by the Blockchain Association.
The industry states that the request to cap platform rewards would be harmful to competition. Few big banks would exert market power over payments services while smaller fintech/crypto companies would be at a disadvantage.