In a bold move that has caught the eye of the cryptocurrency world, Coinbase and PayPal are pressing forward with their stablecoin rewards programs, sidestepping restrictions imposed by the GENIUS Act. The regulation, which took effect earlier this year, prohibits stablecoin issuers from offering yields. Yet, thanks to some crafty legal language, these financial giants have found a way to keep their offerings alive and well.
Navigating Regulatory Waters
Here’s the catch: the GENIUS Act’s wording specifically targets issuers of stablecoins, not the platforms that facilitate transactions. This nuance allows companies like Coinbase and PayPal to offer yield rewards to holders without stepping on regulatory toes. “It’s a clever workaround,” says crypto analyst Jane Thompson. “By focusing on the user side of transactions rather than the issuance, they’re operating within the letter of the law.”
Coinbase has already rolled out its program to a select group of users, promising attractive annual percentage yields (APY) on USD Coin (USDC) holdings. PayPal, not one to be left behind, is set to launch its initiative later this month. These maneuvers are not just about skirting regulations; they’re also about staying competitive in a rapidly evolving market where user engagement is key. This follows a pattern of institutional adoption, which we detailed in Visa Expands Stablecoin Ecosystem To Include PayPal, Circle.
The Market Response
So, what does this mean for the crypto community at large? Well, it seems to be a mixed bag. On one hand, investors are thrilled at the prospect of earning passive income on their stablecoin holdings. “It’s a win-win,” argues crypto enthusiast and blogger Tom Nguyen. “You get stability from the coin and returns that beat most traditional savings accounts.”
On the flip side, there’s a palpable tension among regulators and traditional financial institutions. The GENIUS Act was designed to bring stability to the volatile crypto space by limiting speculative activities. Yet, with these new programs, it appears that the intended clampdown may not be as effective as lawmakers had hoped. “This raises questions about whether the regulation is robust enough,” notes financial consultant Laura Mendes. “And if not, what the next steps might be.”
Historical Context and Future Implications
Looking back, this isn’t the first time the crypto industry has danced around regulatory barricades. In 2023, a similar loophole allowed DeFi platforms to continue offering high yields despite increased scrutiny. These precedents suggest that where there’s a will, there’s a way—and that financial innovation often outpaces regulatory frameworks. For a deeper dive into the economic strategies behind these moves, see Coinbase Reaps Growing Rewards from Circle Ties and USDC Economics: JPMorgan.
As we stand on the brink of this new chapter, the path forward remains shrouded in uncertainty. Will regulators tighten their grip to close these loopholes? Or will they concede to the ingenuity of platforms like Coinbase and PayPal, acknowledging the complex ecosystem they operate in? What’s clear is that the landscape of digital finance is as unpredictable as ever.
The unfolding story of stablecoin rewards is more than just a tale of legal acrobatics; it reflects the broader dynamics of power, innovation, and regulation in the crypto world. As August rolls on, all eyes will be on how these developments influence market behavior and regulatory responses. One thing’s for sure: the conversation is far from over.
Source
This article is based on: Coinbase, PayPal Press Forward With Stablecoin Rewards Despite GENIUS Prohibitions–Here’s How
Further Reading
Deepen your understanding with these related articles:
- Coinbase, JPMorgan Deal Signals Shift in Institutional Posture Towards Crypto: Bernstein
- Ethereum, Solana, and PYUSD in Focus After PayPal’s Global Crypto Rollout
- JPMorgan & Coinbase Team Up: Crypto From Points, Bank-Linked Wallets Coming
Steve Gregory is a lawyer in the United States who specializes in licensing for cryptocurrency companies and products. Steve began his career as an attorney in 2015 but made the switch to working in cryptocurrency full time shortly after joining the original team at Gemini Trust Company, an early cryptocurrency exchange based in New York City. Steve then joined CEX.io and was able to launch their regulated US-based cryptocurrency. Steve then went on to become the CEO at currency.com when he ran for four years and was able to lead currency.com to being fully acquired in 2025.
