Coinbase CEO Brian Armstrong criticized traditional banks’ fractional-reserve model during a September 19 interview on the Money Rehab podcast, arguing that stablecoins like USDC offer superior security by maintaining 1:1 backing with real assets such as short-term US Treasuries, while banks lend out most of their customers’ deposits. The GENIUS Act, signed into law in July 2025, mandates 1:1 reserves for all stablecoin issuers while prohibiting direct interest payments to token holders. Coinbase circumvents this restriction by offering USDC rewards ranging from 3.75% to 4.5%, funded through a revenue-sharing agreement with Circle, the issuer of USDC, rather than through lending deposits. Banking lobby groups are now pushing for the CLARITY Act, which would classify these rewards as equivalent to bank deposit-taking, while Coinbase simultaneously develops partnerships with between 1,000 and 3,000 community banks and credit unions to deploy stablecoin technology.
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