The legislative battle over stablecoins heats up; Coinbase(COIN.US) strives to protect a key revenue source

Coinbase (COIN.US) is intensively lobbying in Washington to preserve a key revenue stream. Analysts believe that, under ideal circumstances, this revenue could potentially increase up to seven times its current size in the future.

Analysts Paul Gulberg and Samuel Radowitz noted that revenue from stablecoins accounts for about 19% of Coinbase’s total revenue in 2025. If the “Genius Act” accelerates the adoption of stablecoins in payment scenarios, Coinbase’s stablecoin revenue could expand by 2 to 7 times. However, the ultimate range depends partly on further revisions and negotiations over the bill’s details. The bill was signed into law by President Trump last July.

The controversy centers on the fact that the “Genius Act” explicitly prohibits stablecoin issuers from paying interest or yields to holders. The ongoing legislative draft may tighten restrictions further, not only limiting issuers but also potentially banning trading platforms, including Coinbase, from offering rewards on stablecoin balances. This change would directly impact Coinbase’s revenue-sharing arrangement with Circle (CRCL.US), the issuer of USDC.

Gulberg stated that whether Coinbase can continue offering stablecoin rewards to customers is just one factor affecting revenue growth; to achieve a sevenfold expansion, Coinbase still needs “favorable provisions in the final crypto legislation.” Data shows that Coinbase’s stablecoin revenue in 2025 is projected at $1.35 billion, up from $911 million the previous year.

Another party involved in the legislative debate is the banking industry lobby. Banks argue that allowing Coinbase and similar institutions to “indirectly pay interest” on stablecoin balances could divert low-yield deposits from banks, potentially disrupting financial stability. The crypto industry counters that their intention is to return the earnings generated by stablecoin reserves to consumers.

In January, Coinbase CEO Brian Armstrong temporarily withdrew support for a draft bill from the Senate Banking Committee. Since then, Coinbase, other crypto companies, and industry organizations have held multiple negotiations with banking representatives at the White House to seek a compromise. Armstrong stated last week that “there is still a path forward” among all parties.

Stablecoin revenue has become a significant growth engine for Coinbase. By 2025, this revenue is expected to grow by 48% year-over-year, mainly driven by interest income from USDC balances. Compared to trading fees that fluctuate with the market, Coinbase’s share of USDC profits with Circle is considered to have higher margins and more predictability. However, starting at the end of 2025, the crypto market experienced a sharp downturn, slowing growth. Coinbase’s total revenue in Q4 declined by 20% year-over-year to $1.8 billion, exceeding expectations, and impairments were recorded on its crypto assets and investments.

Despite this, support remains on Wall Street. Benchmark Co. analyst Mark Palmer maintained a “Buy” rating for Coinbase. He pointed out that Coinbase currently uses some interest earned on USDC’s underlying assets to pay yields to customers, which slightly lowers profit margins; if future payments of yields are banned, profitability could actually improve. Armstrong also expressed a similar view during the recent earnings call, stating that if the company cannot distribute yields to customers, “it might become more profitable.”