1/ This is why we can’t have nice things. It never ceases to amaze me how government can squander progress. In this case, Congress passed the GENIUS Act to foster financial innovation. Now, after false and alarmist bank cries, they’re looking to undo a key part: rewards.

2/ One of the potential “fixes” to the yield “issue” on the table would be to limit rewards shared with users on their own stablecoin balances to *only when they spend them.* In other words, create “stablecoin interchange.” This makes no sense. Here’s why: Traditional payment rewards (like Amex points) are funded primarily by interchange fees. When you buy a coffee, the merchant pays a 2-3% fee (called interchange), and the bank returns a portion of that to you in the form of rewards points. In this model, the bank only makes money when you spend. Every transaction is an extension of credit, where the behavioral incentive is designed to enhance the velocity of money through the system. This stems from the genesis of credit card networks as loose consortiums of banks in the late ‘50s looking to increase customer retail spend and therefore loan volume.

3/ Stablecoins work differently. They are *debit* products, not credit products. The revenue that funds the ecosystem doesn't come from merchant “swipes”; it comes from the yield on the reserve assets (like U.S. Treasuries) backing the tokens. This revenue is generated every second a token is held, regardless of whether it’s ever spent at a cash register. In a stablecoin model, value is a function of AUM (Assets Under Management), not transaction frequency.

4/ Under GENIUS, issuers are blocked from giving yield to time holders. However, any third party can choose to share rewards with users. This cashflow can come from any number of business activities, not just partnerships with stablecoin issuers. But if you restrict rewards to retail transactions, you are *legally requiring the intermediary to pocket 100% of that yield unless the user buys something at a store.*

5/ Here’s what that looks like in practice, if this misguided GENIUS edit moves forward. Make no mistake, the American consumer loses here. This would be a government-mandated windfall for financial intermediaries at the expense of individual Americans. A “holding tax.”

6/ So why is Congress even considering this? Because every bank lobbying organization is telling Congress this is an extinction-level event for their members. The funny thing? It isn’t! There was a study in December that actually found that stablecoins *help* credit creation.