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Welcome to The Payment Expert weekly podcast, brought to you by SBC Media. Each week we analyse the news driving the global payments industry forward; the innovation, the infrastructure, and everything that has to happen to make it all possible.
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If you can't incentivise the consumer to hold a stablecoin like USDC, then why is a consumer going to decide to drop traditional cards like debit and credit, as well as digital wallets in favour of a stablecoin? to the payment expert podcast, your source for the latest news insights and analysis on the payments industry. I'm Lewis Thompson, news editor at payment expert. And with me today is senior journalist at payment expert, Callum Williams and business journalist, Kieran O'Connor. Good to have you both back guys. It's good to be back. I have to say boys that the podcast last week was very good. So I have some big shoes to fill from our fantastic editor, Rachel Kennedy, who did a great job. Yeah, thank you, Lewis. Good to be back again for a time in a row now. So yeah, more of the same, I guess. I mean, maybe, maybe we've got a few events coming up on me as well. they'll be a good few episodes coming up, I should say. Yeah, I was going to say we'll have to keep you around forever, Callan. You'll be forever. And good to have you back on again, Kieran, of course. I'm you can fill in the boots of Rachel for this week very well. I'm talking of events, Callum, you mentioned there, obviously. We had Pay 360 last week, which I was at, and among the conversations there, much like in other recent conferences where I'm sure you've both experienced the same, stable coins was a big part of that agenda, specifically how they fit within existing payments infrastructure, their best use cases. And perhaps most importantly for today, the regulatory picture behind that, because as it happens back over on the news desk where you guys were, that conversation got a lot more interesting, particularly when it comes to the US and the Clarity Act. So, I mean, we've seen a bipartisan compromise, I suppose, a draft from senators also Brooks and Tillis land, proposing to ban yield on passive stablecoin balances, which is what we've seen in the previous draft, suppose. Coinbase having rejected it for a second time. Brian Armstrong has been pretty clear, hasn't he, that he'd rather have no bill than a bad one. So let's get into it. uh Guys, I mean, I suppose the yield ban is still the sticking point, but why is that particular part of the bill so toxic for Coinbase specifically? They seem to not be budging on this, do they? No, the yield band directly impacts one of Coinbase's probably most profitable business lines. Coinbase earns a share of interest on USDC reserves for its partnership with Circle. And it passes some of that through to users as sort of these USDC rewards. So the Senate draft bans any form of yield on stable coin balances, as you said, Lewis, and that's whether they're paid directly by an issuer or rooted through a partner. So this affected the shutdown coin basis reward programs and sort of friends their revenue stream, which I believe topped over a billion dollars last year. It did. I mean, I've got a note down here that it's stable coin revenue alone. I think was about 19 % of its total revenue. That was for Q3 2025. So it is a big part. of its its model. mean, I'm interested to know how it kind of works alongside circling this. Obviously, the circle model is is slightly different circle generates reserving come from holding assets backed against USDC rather than the stable coin and yield alone. Calum, I'm interested to hear your kind of your kind of take on on this and a Coinbase right, I suppose to push back. So it's important to note that Coinbase and Circle are pretty much intrinsically linked with one another. Both firms co-founded USDC back in 2018 and then from 2018 to 2023, the governance of USDC was run by an organisation called Santa Consortium. That was until Circle pretty much held the governance, directly led by the governance of the USDC, whilst Coinbase held an equity stake in Circle. And so USDC in terms of its interest income is split 50 50 between Coinbase and Circle. Coinbase helps the exposure and the marketing of USDC onto other crypto platforms and even traditional uh financial companies that are looking to get on the stable coin payment wave at the moment. and then obviously Coinbase also holds a minority stake in Circle, which went public. in June 2025. So USDC's performance and particularly pertaining to interest, the circulation and the trading volume is pretty much directly tied to Coinbase and their interests. it shouldn't be a surprise to anybody that Brian Armstrong and Coinbase are pretty much fighting to have some form of yield or stablecoin rewards attached to the Senate Banking Committee's draft proposal. Yeah, I suppose it's worth noting too that obviously Circle generates that reserve income from holding the assets backing USDC, so the Treasuries and the cash, and they don't pay yield to holders directly. That's something that Coinbase does, which is perhaps why you've seen more of a public refute to the Clarity Act from Coinbase rather than from Circle. But it's interesting to see how Perhaps uh should the clarity act go through as it stands, should the draft pass legislation, how the commercial exposure shapes up with Coinbase and Circle. Could the new rules, if they go through as they currently stand, actually shift the power here between Circle and Coinbase because they have a sort three-year rolling agreement in terms of... how those things that you mentioned are structured, Callum, can you see a shift in the dynamic between Coinbase and Circle? So in terms of Coinbase looking to possibly even sabotage USDC, I don't think that's the case. think Coinbase and Circle are directly involved in USDC. uh It's still got so many more use cases that's being developed right now in terms of stablecoin payments, both crypto companies, digital asset firms and traditional finance companies. are developing use cases with USDC as it is the second largest stable coin by market cap. But if the yield and the rewards band comes into effect in the US, that is a major hurdle for Coinbase in terms of how to incentivise its customers to hold USDC. Because at the end of the day, I don't think customers are going to start just paying with USDC if there's no incentives and if they do find out those incentives. rewards and interest, then they're just likely not going to pick it up, which also then leads itself into the dangers that were being argued by crypto firms that if yield and rewards are banned in the Clarity Act, then it may start to drive crypto firms to move offshore. I mean, we'll touch on that offshore argument a bit later because obviously there are frameworks being drafted in other countries um for stable coins, which could... Fall into that offshore argument, but if we if we circle back to the bill and Armstrong himself coinbase themselves, they seem to be the only ones because of this yield reward issue. The sticking point that uh are directly opposed to the clarity act as it stands, but is it worth mentioning that Armstrong doesn't actually control the outcome here? It's the senators who control the outcome. So how much does coinbase is opposition actually matter? Yeah, so just on that, I'll just also go back to the last question of slightly Lewis because I think it of explains why Armstrong is being so vocal about this. So with their partnership with Circle, if the clarity act removes the ability to distribute uh yield, Circle becomes the party with more leverage because the issuer still earns interest on reserves regardless. And then that sort of sees Coinbase is negotiating power weekend. And I think we spoke about this offer that they have a deal coming up soon. So it'd be very interesting to see how that goes. On if Armstrong's em sort of vocal outbursts actually matter to the bill being passed, legally eh Coinbase's support isn't actually required and the Senate can pass the bill with or without them. eh But politically Coinbase is obviously still one of the most influential US crypto companies And I can't imagine lawmakers really want to pass a bill that sort of alienates one of the biggest regulated exchange in the country m so while these comments may slow down the momentum I don't think it will really stop the process, but as I said this could definitely go ahead with or with or without Coinbase? Just to add on that as well, think when it pertains to political climate, mean, me and Karen mentioned this as well earlier today in the office, is that there's a Trump card at play here. The president himself, I know there was a lot of backlash from Democratic figureheads on the Agriculture Committee, which obviously passed their drop proposal without any Democratic support, and they were obviously highlighting the Trump family's agenda. when it comes to the Trump family backed World Liberty, which issue the USD one stable coin. There is obviously an incentive for the Trump family to have yield in place with the clarity acts and obviously with the USD one being a stable coin issued by a company that is backed by the Trump family. So yeah, don't be surprised if the president begins to push for this to be included as well. Yeah, it's an interesting point because I know recently as well he'd He basically called for it to get done to get over the line. But obviously, as you mentioned, Callum, he's probably more aligned with Coinbase's position in this too. So it's interesting to see how that develops. Picking up, I suppose, on where things stand, I mean, it's a stalemate, obviously. um And as we mentioned, if the yield band holds in its current form, then you have the offshore argument. Europe, Asia, they've got their own frameworks in place. And so you have the argument where this will be moved offshore. I mean, are regulators in that sense, US regulators actually making the system safer or are they just pushing the risk into other areas? Well, they'd have to go to unregulated markets at the moment. I know there's actually not that many whole crypto regulated crypto markets in the world. know obviously the European Union were the first to act with Mika, the markets and crypto assets regulation. They obviously have certain guidelines for stablecoin listings in terms of asset reference tokens and then also e-money tokens, which are varying different guidelines. There is a ban on yield in in Mika. So that prohibits any issues any issues of uh asset reference tokens from granted interest on stable coins. And then obviously there's the Singapore market that also bans yield. So any regulated market at the moment, you can use this as a use case for the US. They've they've pretty much took the same approach. if they were if companies like Coinbase were to move offshore, it'd have to be in an unregulated market, which obviously then you're starting to. dip your toes in uncertain waters, I should say. Yeah. I I suppose there's the angle from the banking side, the ones that are lobbying to have this yield ban in place, because obviously the banks are trying to protect their own deposit bases. But then the practical consequence is they're pushing at yield seeking capital into structures with no disclosure requirements. And as you mentioned, in those unregulated markets. Is it overall a better outcome for financial stability because it's potentially going to be US customers accessing the Coinbase platform? So are they being responsible? Well, this is sort of a classic regulatory dilemma, which we see in all industries, whether it be gambling, sports or finance. So banning something doesn't remove the demand for it. It just pushes people into these offshore or sort of gray market areas. Now, this has sort of been seen before in finance, after the 2008 sort of uh banking issues. And in the 2010s, we saw the shadow banking migration, which saw people uh move from uh regulated banks after Titan rules. And they sort of moved outside the banking system into sort of these money market funds and sort of repo markets. And these entities weren't actually regulated like banks, but they were. we're obviously performing the same functions. So when you sort of restrict yield in sort of this regulated space, it only reappears in the unregulated markets and often with more leverage and obviously uh less transparency, which isn't actually then protecting any consumers because they're just doing it elsewhere. It's interesting you say that, Kieran. I suppose the counter argument again to that is the dominance of USDC itself. And will that be durable enough to withstand any migration into unregulated markets? And the argument also could be that if you look at Europe and Asia, those markets are pushing towards regulation themselves. uh Look at the UK. Obviously the EU has as me because it stands, but the UK is has its stable coin sandbox. So they may be markets to look at, but in terms of the USDC itself, does this have any impact on on the on the stable coin? I don't know what Colin thinks, but I would suggest that its dominance doesn't really vanish overnight from. From this issue, Europe has sort of make a Singapore has. uh clear frameworks and Hong Kong is sort of progressing its own. But I don't really see USDC really losing much on its sort of market dominance. What do you think, Colin? It all comes down to consumer adoption, which we've been talking about in the stablecoin industry now for, since it was first booming last year, because many, almost all use cases are B2B, right? And so there's a cross-border admittance as a near instant settlement. If you can't incentivise the consumer to hold a stablecoin like USDC, then why is a consumer going to decide to drop traditional cards like debit and credit, as well as digital wallets in favour of a stablecoin, which, yeah, it might send it instantly, but if you're going to tell the consumer, oh, you could have had yield and rewards attached to this, but, it's regulated now, so you can't have it, then there's no point in the consumer holding it. So it's an issue that in the long term, If USDC can't be healthy yield, then we might start to have less consumer adoption use cases available in the long run, I guess. That's true. I mean, I've got a quote here that once the draft bill landed, Circle dropped 20 % in a single session, effectively wiping two billion off its market cap. Now, banks like Citi have said it's not a thesis killer, it's just a suppose a short-term market reaction, but obviously if you're Coinbase and you're seeing that kind of an issue, which I suppose goes back to the point as to why they're pushing back against the Clarity Act. don't want stable coin interest because they believe it's going to be the flight on deposits, something like into the tens of billions that they're fearing in the next couple of years if it was to be attached. Crypto firms are arguing that it's pro-consumer and our band's anti-competitive. They've had two White House meetings deliberating over this. if Coinbase still holds out, I guess it's not going to get far in the short term, but in the long term, the regulators are just going to say, listen, we need to get the rolling on this. And if you're not supporting, then we're going to have to leave you behind. I don't know about you, Karen, but. Yeah, I mean, I don't think it threatens circles, reserve income at all, uh circles, revenue, as we mentioned before, sort of comes from that interest on reserves and not from paying the yield to users. So that obviously still remains intact. The challenge does, as Callum says, come around demand. So if you just can't earn anything on that USDC, the incentive to hold them sort of large balances isn't there. So this probably could threaten circle over time, but I don't think we'll really see any immediate threat. Yeah. And there's also just there's also so many good consumer benefits to using stable coins and earning interest and yield. It is a very good like new innovative uh alternative from traditional payments and traditional currencies. It's obviously all boils down to the regulation and the legislation. And at the moment, it's. It's not going Coinbase's way and it's probably not going the overall crypto industries way if they had it their way, I guess. Sure. mean, uh closing out then on the Clarity Act, we've had a lot of voices from the DeFi space, particularly saying that the likes of Coinbase should just accept the draft bill as it stands and work on ironing out the yield rewards issues afterwards, just to make sure that the act goes through. think in April after Easter, they're looking to kind of come back and look at the draft again. Obviously, the midterms has been cited as a kind of deadline for this in terms of getting it over the line. Do you guys think Coinbase are right at the minute to continue to push back or should they accept it as it stands and then look at ironing out the other issues later on down the line? I mean, they've got the best interests at heart, haven't they? If I was Convince, I'd probably be doing the same. Someone come to me with this bill and it wasn't what I wanted. He's got every right to sort of go back and complain and try and push for over amendments. So I don't think he's doing anything wrong. Yes, there's a lot of pressure from the wider crypto community to get this resolved and even from Donald Trump himself. I only put a post out a few months ago saying that we sort of need to stop dragging our feet on this and... sort of get all these bills pushed and passed. But I don't think he's doing anything wrong at all. I think he just he's got the interest of his best interest of his company at heart. And that's sort of his his role and his his responsibility to do that. Karen pretty much is up contrary and I know he's pretty much just summarized it there for me. I mean, to play devil's advocate, I think the possibly doing as a service for the rest of the industry. But I do agree that they have business interests at heart and they are quite in right to lobby for this. mean, they do have a point when it comes to pro-consumer and realising some of them benefits. Obviously we do know that consumer adoption of stable coins is slowly, slowly increasing, but not to the mass effects that we've... that may come down the line and obviously if there's a bad yield and uh rewards then that's going to stunt the growth of consumer adoption. So there's both sides to it and I think it possibly might be able to get past after Easter but I can't envision a world where it gets everyone's agreement by the end of April I guess. Maybe May, let's say May. Okay, we'll note that time down. And of course, as and when more news comes out on the Clarity Act, we'll be covering it over here uh at Payment Expert. And if you've been listening to this or watching this wherever you are, and you have any particular thoughts on the topics we've been discussing, please do let us know. But unfortunately, that's all we have time for today. So thank you very much, Kieran, Callum, for joining me again. And if you're not already subscribed to the Payment Expert podcast, Make sure you are wherever you get your podcasts with plenty more insights and analysis to come over the coming weeks and months. And for the latest news as it happens, head over to paymentexpert.com. We'll see you next time. you