The Battle for Market Structure: Paul Grewal Warns Banks Are Re-Litigating Stablecoin Yield

We think that it's not surprising that the banks are looking now to revert back to a world where all of that economic benefit remains in the hands of the institutions. That's the business model effectively that they have relied upon for now decades. But we think it's very important to call this out for what it is and to hold firm on this basic idea that sharing economic benefits with participants and networks is frankly what crypto has always been about and it's not up to Congress or anybody else to pick winners and losers.

Hey Jen. Hey Ronaldo. How are you?

I'm doing well. Yeah. Thanks very much for joining us. How's your new year going? Ronaldo and I were saying, we really kicked off 2026 with a bang.

Yeah, I definitely felt like I started the new year ready, refreshed, and recharged. And that lasted about I don't know 10 minutes because we are running at a full sprint right now.

Count me as an optimist. I think we are going to see legislation pass. I know that there are a number of outstanding issues that remain and the last push is in many ways always the hardest push when it comes to getting law passed by the Congress that's ready for the president's signature, but I think we're going to get it done. I think at the very top of the list of outstanding hard issues remains rewards. And it's clear there is a concerted effort on the part of the banking industry to not only relitigate an issue that was resolved when the Genius Act was passed in the middle of last year, but to really fundamentally entrench a competitive advantage for the industry when it comes to paying the economic benefits to holders and users of tokens in ways that we think are entirely counterproductive. We're confident we're going to be able to work through that. I think that it's clear senators and congressional leaders more generally on both sides of the aisle are focused on making sure that consumers win and that competition remains robust in the space. But there is work that remains to be done. We think we're going to get there. It's just going to take a bit more time.

Well, Ronaldo, stablecoin rewards was an issue that we intensely debated in the last go-round around Genius and where we landed under that legislation after a lot of engagement and frankly a lot of disagreement from many different voices in the conversation was a limitation on issuers in terms of offering yield solely in order to recognize holding the assets. But there was an explicit carveout for other members of the ecosystem in their ability to pay rewards to users in a way that shares the economic benefit of stablecoins with the people who hold them and use them. And that's why rewards are so important. Fundamentally, what the current law recognizes is that it's not just for the issuers of the stablecoin or the distributors of the stablecoin to enjoy those economic benefits. It's critically important that consumers and others also participate in that benefit. We think that it's not surprising that the banks are looking now to revert back to a world where all of that economic benefit remains in the hands of the institutions. That's the business model effectively that they have relied upon for now decades. But we think it's very important to call this out for what it is and to hold firm on this basic idea that sharing economic benefits with participants and networks is frankly what crypto has always been about and it's not up to Congress or anybody else to pick winners and losers. Let the marketplace sort all this out. We don't think there will be any meaningful impact whatsoever from this on community lending, which has been the argument that many of the banks have been making for some time. There's no empirical evidence whatsoever that rewards impacts community lending anyway, because the fact of the matter is that we don't see retail substituting stablecoins for their deposits particularly with the community banks. There's just no evidence of that.

Well, we are certainly no stranger to enforcement actions by the states. It's unfortunate, for example, that even after the SEC withdrew its enforcement case against Coinbase last year, one state, Oregon, has chosen to pursue effectively the same Gary Gensler-inspired litany of complaints and attacks against crypto on its own. So we think it is important for Congress to act in order to establish a level playing field across the industry and a common set of rules that can apply whether you're operating in Oregon or California or Iowa or anywhere else in the United States. States are going to continue to play an important role even under a market structure framework because of course states retain their ability to regulate for example money transmission licenses and the like. But we do think that a clearer articulation of what is subject to federal oversight, what is subject to state oversight is critically important and we're confident we're going to get there. It's just in the last few days before any legislation passes, the going really does get tough and that's what we're seeing right now.