Coinbase-Circle Stablecoin Deal Faces Rewrite Amid GENIUS Act Proposals

The GENIUS Act's proposed guidance has sent shockwaves through the crypto industry, particularly in regards to the revenue-sharing deal between Coinbase and Circle. According to VanEck's Matthew Sigel, the new rules were already expected to limit each permitted payment stablecoin issuer to a single branded stablecoin.

The current agreement, set up in 2023, sees Coinbase receiving 100% of interest generated on its platform from USDC holdings, while sharing 50% revenue from off-platform USDC with Circle. However, the OCC's proposed guidance effectively limits each permitted payment stablecoin issuer to a single branded stablecoin.

This change could have wide-ranging implications for companies such as Paxos, which has an arrangement to issue PayPal's dollar-pegged stablecoin, offering rewards of roughly 4% on customer balances. The GENIUS Act will take effect either 18 months after being passed or 120 days after regulators finalize the proposed rules, whichever happens first.

While some may see this as a restriction on innovation, VanEck's Sigel noted that the OCC's guidance 'just codifies what's already in GENIUS.' The deal between Coinbase and Circle is set to be renewed later this year, which could lead to further changes in their agreement.