Are You Sure Your USDC Rewards Are Safe?

Under the GENIUS Act, the stablecoin law Congress passed in July 2025, companies that issue stablecoins can’t pay interest to the people who hold them. Some exchanges pay holders anyway.

Coinbase (COIN) pays 3.75% a year to customers who hold USDC, the dollar-pegged stablecoin issued by Circle, as long as they belong to Coinbase One, its paid membership tier. Coinbase pays those rewards itself, and under a revenue-sharing agreement it receives a share of the interest Circle earns on USDC’s reserves.

Whether rewards programs like these violate the GENIUS Act’s ban on interest remains a gray area. Banks say they amount to the same interest paid another way, and have urged the Office of the Comptroller of the Currency (OCC) to tighten its rules on money passed to holders through partners. (Rewards were also a major sticking point in talks over the CLARITY Act, the broader crypto market-structure bill, which failed in September.)

On Oct. 21, the OCC, the federal regulator for nonbank stablecoin issuers, finalized its rule, effective Jan. 18, 2027, and dropped its proposed presumption that such payouts break the ban, choosing to judge each arrangement case by case. In other words, the OCC went the opposite way from the stricter test the banks wanted.

For Coinbase, that means, at least for now, its USDC rewards can continue unabated. The rule gives them no safe harbor, so they remain open to challenge.

For USDC holders, the 3.75% is not guaranteed. If the OCC decides Coinbase’s program is just a loophole to bypass the GENIUS Act’s ban on stablecoin interest, the payouts could be shut down.

For Coinbase shareholders, the question is how much of the company rides on those rewards. Coinbase fought to keep them: in January, CEO Brian Armstrong pulled the company’s support for a Senate draft of the CLARITY Act, objecting to “draft amendments that would kill rewards on stablecoins, allowing banks to ban their competition” and other provisions. Stablecoins brought in $292.1 million in Coinbase’s second quarter, its 10-Q shows, about a quarter of its net revenue. Whether losing the rewards would hurt depends on two things: how much the rewards already cost Coinbase, and how much of its stablecoin revenue comes from USDC that earns no rewards at all.

What the Rule Says

The agency has kept the ban on issuers paying holders “any form of interest or yield” “solely in connection with the holding, use, or retention” of a stablecoin.

However, the rule also says a payment that reaches stablecoin holders through an intermediary “might be made, at least in part, for other reasons,” which could put it outside the ban.

Coinbase describes its rewards as “a loyalty program funded by Coinbase.” Whether that is enough is now the OCC’s call. The agency wrote that it “declines to presume that rewards programs that predated the GENIUS Act comply with the GENIUS Act,” so Coinbase’s program gets no grandfathering.

On payments more generally, the rule says “payments for bona fide services generally would not be prohibited” when no other facts point the other way, without naming any particular arrangement.

The agency added that as the payment stablecoin market evolves, it expects to gain enough real-world “experience with identifying prohibited transactions” to eventually propose a clearer rule defining its “yield prohibition.”

Rob Nichols, president and CEO of the American Bankers Association, said the result “will preserve the status quo for crypto platforms despite Congress’s clear intent to protect local lending.” Faryar Shirzad, Coinbase’s chief policy officer, posted that in the rule “there’s a lot to like.”

How the Money Moves

Circle (CRCL) earns interest on USDC’s reserves. Under its agreement with Coinbase, described in Circle’s IPO filing, Coinbase receives the reserve income on USDC held in Coinbase products, after a slice Circle keeps, plus half of what remains on most USDC held elsewhere. Circle said it paid about $819 million, or 59 cents of every revenue dollar, to distribution partners and transaction costs in the first half of 2026.

In the rest of the issue, subscribers get:

• • How much of what Coinbase earns on its customers’ USDC the rewards already eat, and how that changed
  • What happens to Coinbase’s stablecoin revenue if the rewards end, and how much customer USDC would have to leave for it to hurt
  • The one scenario that puts all $292 million of Coinbase’s quarterly stablecoin revenue in play, and who holds the leverage
  • Why Circle’s planned move to a New York trust company leaves open which rulebook judges USDC’s rewards
  • Bull, base and bear ranges for Coinbase’s stablecoin revenue after rewards, and the dates that decide them

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