If lawmakers ultimately ban stablecoin rewards under the proposed CLARITY Act, Coinbase (COIN) could lose one tool it uses to attract users to hold digital dollars on its platform — though analysts say the impact on the exchange’s business may be limited.

As lawmakers debate the future of stablecoin regulation in Washington, one unresolved question in the proposed CLARITY Act could have significant implications for Coinbase and other stablecoin partners’ business model: whether companies will be allowed to share yield with stablecoin holders.

The bill, which has been stalled in Congress since January, seeks to establish a regulatory framework for stablecoins — digital tokens typically pegged to the U.S. dollar. A central point of contention is whether crypto firms should be allowed to pass through the yield earned on the reserves backing those tokens. Banks and some lawmakers have pushed to prohibit interest payments, while crypto companies, including Coinbase, have argued that restricting rewards would undermine stablecoins’ utility and competitiveness.

However, this week there were some glimmer of hope from D.C. One possible deal may be that stablecoin issuers and their partners tweak the language of their offerings to make them sound distinct from bank deposits, Senator Cynthia Lummis said Wednesday.

Read more: Key U.S. senator on crypto market structure bill negotiation: ‘We think we’ve got it’

Still, for Coinbase, the issue matters because stablecoins, particularly USD Coin (USDC), have become an important source of revenue and user engagement.

Under the CLARITY Act’s current draft, stablecoin issuers would be barred from paying interest directly to holders. But according to one industry source familiar with the legislation who didn’t want to be named, the language leaves room for alternative structures that could still allow rewards to reach users.

“There are so many loopholes in the CLARITY Act when it comes to stablecoin yields that the genie is kind of out of the bottle already,” the source told CoinDesk. While the bill prohibits issuers from paying interest, it does not clearly ban exchanges or platforms from distributing incentives such as rebates, credits or other rewards.

The distinction between “interest” and “rewards” is thin, the source added. Marketing incentives or loyalty programs could effectively replicate the economic impact of yield while technically remaining compliant. That echoes similar debates around guidance tied to the GENIUS Act, where the line between restricting yield and shaping how it can be distributed through partners remains unclear.

Another provision in the bill may further complicate enforcement. The legislation contains a carveout for payments tied to activity — meaning yield could potentially be distributed if a stablecoin is used in transactions, lending or other financial activity. In practice, that could allow structures where stablecoins are routed through decentralized finance protocols to generate returns before those rewards are passed on to users.

Even partnerships between issuers and exchanges could potentially achieve a similar result. For example, an issuer could earn yield on Treasury reserves, share some of that revenue with an exchange partner and have the exchange distribute rewards to users — an arrangement that regulators have warned might constitute evasion but that is not explicitly banned in the bill’s current form.

“It feels like even a mediocre marketing professional could come up with several creative structures that would be compliant,” the source said.

Not ‘existential’

Wall Street analysts say that the debate has implications for Coinbase but is unlikely to threaten the company’s broader business model.

Owen Lau, an analyst at Clear Street, said the ability to share stablecoin yield is only one of many ways the company attracts users to its platform.

“It’s important, but it’s not even close to existential,” Lau said. Coinbase already generates revenue from trading, derivatives and its Base blockchain ecosystem, and many users come to the platform for services beyond stablecoin rewards.

In 2025, transaction revenue remained the exchange’s main source of revenue, though stablecoin revenue had increased exponentially from the year prior, bringing in $1.35 billion in 2025 compared to $910 million in 2024, making it the second-largest driver of revenue, according to a recent filing.

Coinbase, however, takes a slightly different view on this debate.

“Ironically, if a crypto rewards ban went into law, it would make us more profitable since we payout large amounts in rewards to our customers holding USDC,” Coinbase CEO Brian Armstrong wrote in a post on X in February. “But we don’t want this to happen, it’s better for customers to get rewards, and it’s better for the US to keep regulated stablecoins competitive on a global stage.”

Stablecoin incentives do play a strategic role, however.

Clear Street’s Lau said Coinbase benefits when customers keep USDC on its platform because the company can capture the full share of yield generated by the reserves backing the token. If users move those assets to external wallets or decentralized platforms, Coinbase may receive only a portion of that revenue.

“If they cannot give enough incentive to customers, these people may move USDC away from Coinbase wallets,” Lau said, which could reduce the company’s share of stablecoin-related income.

At the same time, the near-term financial impact may be limited. Lau noted that Coinbase largely passes stablecoin yield through to users, meaning the revenue is often offset by expenses.

“From an earnings perspective, it actually doesn’t change much,” he said, adding that the bigger question is whether restrictions could slow the long-term growth of USDC adoption.

If the final rules allow activity-based rewards or loyalty-style incentives, Lau said Coinbase could still use those programs to encourage customers to hold and use USDC on its platform, potentially driving higher market capitalization for the stablecoin and increasing the revenue Coinbase shares with Circle.

For now, the outcome remains uncertain as lawmakers continue negotiating the bill’s language.

But even if strict limits on yield survive, analysts and industry participants say crypto companies are likely to adapt, ensuring that stablecoins remain a competitive feature of the digital payments ecosystem.

Shares of Coinbase are down about 12% year to date, while bitcoin is down 19%.