The rules for American stablecoins are arriving one agency at a time. On September 24, the Federal Reserve proposed rules for the stablecoin issuers it will supervise. On September 30, the Treasury published its first binding rule under the 2025 GENIUS Act, setting a $10 billion line between issuers that can choose state regulation and those that must answer to federal regulators, according to an analysis of the rule. The law takes effect on January 18, 2027.
Meanwhile, the banks are not waiting. On September 28, Citi expanded its partnership with Coinbase so that its large corporate clients can accept stablecoin payments through its Spring by Citi platform, with Coinbase handling the blockchain side and converting the tokens to dollars for settlement, The Block reported. The merchant never has to hold a token.
Coinbase CEO Brian Armstrong framed it this way when the partnership began last year:
It’s not a debate anymore – crypto and stablecoins are the tools that will update the global financial system.
Excited to be collaborating with @Citi to work on improving stablecoin utility and digital asset adoption with their clients. https://t.co/IDpniQq5hh
— Brian Armstrong (@brian_armstrong) October 27, 2025
He is half right. The debate over whether stablecoins belong in the financial system is mostly over. The fight now is over something narrower and much more valuable: who gets paid for holding them.
The money is in the reserves
A stablecoin is a token redeemable for one dollar, backed by reserves the issuer holds in cash and short-term Treasuries. Those reserves earn interest. The market is roughly $300 billion, dominated by Tether and Circle’s USDC, according to a White House Council of Economic Advisers analysis from April.
The GENIUS Act bars stablecoin issuers from paying interest or yield to the people who hold their tokens. But as the council notes, the law does not explicitly prohibit affiliate or third-party arrangements that pass some of that interest along. In practice, that channel already exists: Circle shares part of the interest on its reserves with Coinbase in proportion to the USDC held on its platform, according to the Congressional Research Service.
Banks versus crypto, in their own words
That gap is where the lobbying has gone. In comments on the regulators’ proposals, bank groups including the American Bankers Association and the Bank Policy Institute urged a broad reading that would treat any economic benefit tied to holding a stablecoin as prohibited interest, American Banker reported. Their concern is deposits. Money that sits in a stablecoin earning rewards is money that is not sitting in a bank account funding loans. Estimates cited in the debate warned that if third-party rewards are allowed, community bank lending could fall by as much as $850 billion.
Coinbase and the American Fintech Council argued the opposite: the law bans only issuers from paying yield, and ordinary commercial arrangements, including rewards from platforms, should remain allowed. Sens. Thom Tillis and Angela Alsobrooks proposed a middle path that would prohibit rewards that are economically or functionally equivalent to bank deposits.
What the White House economists found
The White House economists tested the banks’ central claim. At the council’s baseline assumptions, eliminating stablecoin yield would increase bank lending by about $2.1 billion, or 0.02 percent, at a net welfare cost of $800 million. Even stacking every worst-case assumption, the council found $531 billion in additional lending, a figure that would require the stablecoin market to grow to about six times its current size relative to deposits, among other conditions it called implausible. Its conclusion was that a yield ban would do very little to protect bank lending while giving up the consumer benefits of competitive returns.
That is a striking gap: a potential $850 billion hit from the banks’ side, a $2.1 billion effect in the economists’ baseline. The two are not measuring exactly the same scenario, and models depend on their assumptions. But the distance between them is wide enough that the debate is not only about protecting lending to farms and small businesses. It is also, unavoidably, about which industry earns the interest on a growing pool of dollars.
Why the Citi deal fits
Seen that way, Citi’s move makes sense. The bank is not fighting stablecoins. It is making them a payment rail that runs through its own accounts, where the money still settles as dollars in a bank. If stablecoins become plumbing rather than savings, banks keep the deposits and the crypto firms earn fees for moving money. If they become a place to park dollars and earn rewards, the balance of power shifts.
Regulators are still writing the rule that decides which of those futures arrives. The OCC’s final GENIUS Act rule is still pending, and how it defines prohibited interest will matter more than any partnership announcement. Watch that definition. It is where the real money in stablecoins is being decided.
Related reading: Crypto’s Big Bill Failed 49–50. The Rules Coming Instead Can Be Undone Just as Fast.
