The GENIUS Act’s Yield Lacuna: How COINBASE CEO Brian Armstrong Became a Public Enemy

The GENIUS Act in Brief

The Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS Act) was designed to regulate stablecoins, ensuring they were safe, transparent, and integrated into the broader financial system. Its architects aimed at preventing banks from offering risky yield products tied to stablecoins, fearing systemic instability. In carving out this prohibition, lawmakers unintentionally (or intentionally) created a regulatory gap: banks were barred from offering yield on stablecoins, while crypto exchanges like Coinbase were not.

Understanding the Yield Prohibition Gap and the debates surrounding

The GENIUS Act explicitly prohibited banks from offering yield-bearing stablecoin accounts, treating them as unsafe deposit substitutes. However, crypto exchanges were not included in the prohibition, allowing them to continue offering yield products (like Coinbase’s “Earn” program).

Banks have argued this was unfair: they were restricted from innovating, while exchanges could attract customers with higher returns. Armstrong seized on this gap, positioning Coinbase as a champion of consumer choice and innovation.

The omission also created a form of regulatory arbitrage, where investors could bypass banks and earn yield through exchanges. This undermined the Act’s intent to limit risk in the financial system, while simultaneously boosting the appeal of crypto platforms.

By exploiting the yield gap, Armstrong directly challenged the banking sector’s dominance. He warned that reopening the GENIUS Act to close the gap would cross a “red line,” destabilizing crypto innovation. Armstrong accused banks of lobbying to suppress competition, framing them as anti-innovation — a move that drew sharp backlash from regulators and financial elites.

Conclusion

The GENIUS Act’s prohibition on yield was meant to safeguard the financial system, but by targeting banks and omitting exchanges, it created a regulatory loophole. Brian Armstrong’s refusal to compromise and his exploitation of this gap made him both a hero to crypto advocates and a “public enemy” to U.S. financial institutions.

This controversy illustrates the deeper (and long-standing) struggle between the need for regulating the cryptocurrency industry and encouraging innovation. Armstrong’s fight over yield is not just about stablecoins. It is about who controls the future of money.

Author: Balan

The GENIUS Act’s Yield Lacuna: How COINBASE CEO Brian Armstrong Became a Public Enemy was originally published in Pundi X on Medium, where people are continuing the conversation by highlighting and responding to this story.