Will Coinbase's stablecoin revenue soar sevenfold? The Genius Act banning interest payments actually leads to higher profits

Cryptocurrency exchange Coinbase has recently been actively lobbying in Washington to protect a key lucrative business. According to Bloomberg, under the framework of the Genius Act signed by Trump, if stablecoins become more widespread in the payments sector, Coinbase's related revenue could surge sevenfold.

Stablecoin revenue surges seven times?

BI analysts Paul Gulberg and Samuel Raditz noted in a report that if stablecoin applications in payments continue to grow, under the framework of the Genius Act signed by Trump last July, Coinbase's stablecoin business revenue could increase two to seven times. By 2025, stablecoin operations are expected to account for about 19% of the company's total revenue, contributing $1.35 billion (up from $911 million the previous year). This income is more stable and higher than transaction fees that fluctuate with market volatility.

Legislative battles: Stablecoin interest payments become the biggest controversy

The new version of the Genius Act prohibits stablecoin issuers from paying interest to holders, and ongoing negotiations may impose stricter regulations, potentially banning exchanges like Coinbase from offering rewards linked to stablecoin balances. This change would directly impact Coinbase's profits from USDC issuer Circle, especially since stablecoin revenue has been a significant income source, with interest income on USDC balances growing 48% last year.

The biggest resistance in the legislative process comes from traditional banking. Banking groups worry that if Coinbase pays interest to stablecoin customers, it could siphon off low-interest deposits from banks, disrupting the financial system. Industry leaders in crypto counter that they simply want to earn from the reserves of stablecoins and return the profits to consumers in the form of interest.

In January, Coinbase CEO Brian Armstrong temporarily withdrew support for a Senate Banking Committee draft bill. Subsequently, crypto industry representatives and banking officials held several meetings at the White House to find a compromise. Last week, Armstrong revealed that both sides seem to have found a "way out."

Could banning interest payments actually be more profitable?

The crypto market has recently been sluggish, causing Coinbase's Q4 revenue to decline by over 20%, and forcing some asset impairments. However, Benchmark Co. analyst Mark Palmer rated Coinbase as a "buy." He pointed out that Coinbase currently rewards customers with a portion of the interest earned from USDC to retain users, which actually burdens profit margins.

This view aligns with what CEO Armstrong said earlier this month during the earnings call. He told investors:

"Actually, this will make us more profitable because we will continue to earn economic benefits from Circle. Now, we are passing most of that to our customers. If we are prohibited from doing so, ironically, it would make us even more profitable."

This article, "Coinbase Stablecoin Revenue to Surge Sevenfold? Genius Act Bans Interest Payments but Becomes More Profitable," first appeared on Chain News ABMedia.