Industry Coalition Rallies to Defend Stablecoin Rewards as Regulatory Debate Intensifies

Over 125 Organizations Unite to Preserve Consumer Benefits and Innovation in Digital Asset Ecosystem

In a powerful display of industry solidarity, more than 125 organizations and companies have mobilized to defend stablecoin rewards programs against potential regulatory reinterpretation. The coalition, spearheaded by the Blockchain Association, warns that restricting these incentives would undermine consumer choice, stifle competition, and disrupt a carefully negotiated regulatory framework established under the GENIUS Act. This developing situation highlights the ongoing tension between innovation in the digital asset space and regulatory concerns about financial stability.

Coalition Warns Against Reinterpreting GENIUS Act Provisions

The Blockchain Association’s letter, delivered on December 18 to Senate Banking Committee Chairman Tim Scott and Ranking Member Elizabeth Warren, represents a pre-emptive strike against what industry participants view as attempts to expand the GENIUS Act’s prohibitions beyond congressional intent. “We, the undersigned organizations and companies, write to oppose efforts to reinterpreting and expand the GENIUS Act’s prohibition on interest or yield beyond what Congress enacted,” the coalition stated in its correspondence.

Lindsay Fraser, chief policy officer at the Blockchain Association, emphasized the high stakes involved. “125+ organizations and companies are aligned: rolling back lawful stablecoin rewards would take money out of consumers’ pockets, reduce choice, and suppress competition,” Fraser noted on social media. “Congress settled this tradeoff during the GENIUS process—and consumers benefit from the implementation of the law as written.”

The letter argues that proposals limiting rewards or incentives offered by platforms or third parties in secondary markets would “reopen a settled issue, undermine a carefully negotiated compromise, reduce consumer choice, suppress competition, and inject uncertainty into the implementation of a new law before regulations have even been proposed.” This strong language underscores the industry’s concerns about regulatory overreach that could fundamentally alter the stablecoin landscape.

Distinguishing Between Issuer Interest and Platform Rewards

Central to the industry’s position is the distinction between interest paid by stablecoin issuers and rewards offered by platforms and other third parties. The coalition emphasized that Congress deliberately prohibited stablecoin issuers from paying interest while preserving the ability of platforms, intermediaries, and other third parties to design lawful rewards programs. This careful delineation was established to address balance-sheet and maturity-transformation concerns at the issuance level while fostering innovation in the application ecosystem.

“The distinction between issuer interest and platform rewards is not merely semantic—it reflects fundamental differences in risk and business models,” explained a senior executive at one of the signatory organizations who requested anonymity due to the sensitive nature of ongoing regulatory discussions. “Issuers holding reserves have potential systemic implications, while platforms offering rewards are more akin to traditional loyalty programs in the financial services sector.”

The coalition argues that restricting these rewards would create an uneven playing field, disadvantaging stablecoin payment systems compared to traditional card-based networks. They point out that banks routinely offer credit card rewards and incentives despite engaging in lending activities that create inherently greater structural risks than those posed by stablecoin platforms. This competitive disparity could ultimately harm consumers by limiting choice and innovation in the payment space.

Industry Heavyweights Present United Front

The breadth and depth of the coalition demonstrate the issue’s significance across the digital asset ecosystem. Signatories include major trade organizations like the Crypto Council for Innovation and the American Fintech Council, alongside leading companies such as a16z Crypto, Coinbase, Ripple, Kraken, Gemini, Paxos, Stripe, and PayPal. The Solana Policy Institute joined dozens of regional blockchain associations and advocacy groups in backing the initiative, creating a unified voice rarely seen in the often-fragmented digital asset industry.

“We urge Congress to reject any effort—whether in market structure legislation or elsewhere—to limit or prohibit lawful rewards offered by platforms or other third parties consistent with GENIUS,” the coalition stated emphatically. “Preserving the balance Congress struck is essential to protecting consumers, fostering competition, and ensuring that market structure legislation can advance on a bipartisan and durable basis, rather than becoming a vehicle for entrenching legacy interests at the expense of innovation.”

This extraordinary mobilization reflects growing industry concern about regulatory approaches that could hamper innovation while offering questionable benefits to financial stability. The coalition’s formation also signals increased sophistication in the digital asset industry’s policy advocacy, with companies and organizations increasingly willing to collaborate on shared priorities despite competitive differences.

Economic Analysis Supports Coalition Position

The coalition bolstered its arguments with economic analysis challenging assumptions about stablecoins’ impact on traditional banking. The letter referenced research finding no evidence that stablecoin adoption has driven disproportionate deposit outflows from community banks, directly addressing concerns sometimes raised by traditional financial institutions and their advocates.

Proponents of stablecoins maintain that these payment instruments offer significant advantages—including faster settlement, lower transaction costs, and enhanced transparency—that can expand consumer choice while operating within established regulatory boundaries. “Payment stablecoins represent a technological evolution, not a regulatory evasion,” noted another industry executive familiar with the coalition’s position. “The GENIUS Act framework recognized this distinction, creating appropriate guardrails while allowing benefits to flow to consumers.”

The coalition also highlighted the substantial reserves already held by banks at the Federal Reserve, suggesting that concerns about liquidity impacts from stablecoin adoption may be overstated. This data-driven approach reflects the industry’s increasing emphasis on economic analysis to support regulatory positions, moving beyond philosophical arguments about innovation to engage directly with policymakers’ practical concerns.

Implications for Digital Asset Regulation’s Future

This coalition effort comes at a critical juncture for digital asset regulation, as policymakers continue developing frameworks for an industry that has outgrown its early regulatory ambiguity. The stablecoin rewards issue exemplifies broader tensions between innovation and stability that characterize digital asset policy debates globally.

“Preserving the balance Congress struck is essential to protecting consumers, fostering competition, and ensuring that market structure legislation can advance on a bipartisan and durable basis, rather than becoming a vehicle for entrenching legacy interests at the expense of innovation,” the letter concludes, highlighting the coalition’s view that regulatory approaches must balance multiple priorities rather than prioritizing stability concerns exclusively.

As Congress and regulators consider next steps, the coalition’s unified stance sends a clear message about the importance of regulatory predictability and proportionality in fostering responsible innovation. The coming months will likely determine whether the carefully negotiated balance in the GENIUS Act will endure or whether regulators will seek to reinterpret its provisions in ways that could reshape the stablecoin landscape for years to come.

For consumers, businesses, and investors navigating the evolving digital asset ecosystem, the outcome of this regulatory debate will have far-reaching implications for the availability, utility, and competitiveness of stablecoin products in the American financial marketplace. The coalition’s extraordinary mobilization underscores the high stakes involved as the regulatory framework for digital assets continues to evolve.