Coinbase (COIN) is playing hardball with Congress. The exchange has warned lawmakers it might pull support for a major crypto market-structure bill if new provisions strip away its ability to offer rewards on stablecoin holdings. The threat comes as the legislation heads for Senate committee markup this week, with proposed changes that would limit stablecoin rewards exclusively to regulated banks or trust-chartered institutions.

Here's what's really happening: traditional banks see stablecoins as a threat to their deposit base, and they're trying to use this bill to kneecap the competition. The banking lobby is pushing hard for restrictions, while crypto-native firms are pushing back just as hard. According to Bloomberg, this fight has already weakened bipartisan support and raised the specter of delays.

The Money at Stake

For Coinbase, this isn't some abstract policy debate. Stablecoin rewards represent serious money, largely tied to interest earned on USDC (USDC) reserves that the company shares with Circle (CRCL). The exchange pulled in about $1.3 billion in stablecoin-related revenue in 2025. New restrictions could drain USDC balances from the platform and take a material bite out of earnings.

The irony here is that the recently passed GENIUS Act already prohibits stablecoin issuers from paying yield directly. But it left a loophole allowing third parties like exchanges to offer rewards instead. Banks now want that loophole closed. Crypto firms argue that would crush competition, undermine previous compromises, and ultimately weaken the dollar's global position.

Time Running Out

Bernstein analysts are sounding the alarm that the window for passing comprehensive crypto legislation is narrowing fast. The real obstacle isn't technical issues like token classification or DeFi rules anymore. It's this fundamental clash between banks worried about deposit flight and crypto firms trying to build new financial infrastructure.

According to Bernstein, the bill needs to advance by the second quarter or risk getting swallowed by midterm election politics. That's true even with a supposedly pro-crypto administration in the White House. When banks and crypto exchanges are locked in a cage match over who controls yield on digital dollars, even political tailwinds might not be enough.