Coinbase Goes Scorched Earth to Protect "Rewards"
Reflecting On 5 Years of Fintech Business Weekly, Javice Gets 7-Year Prison Sentence, Nubank Files OCC Charter App, CFPB Prioritizes "Debanking"
Hey all, Jason here.
This week’s newsletter marks an anniversary: five years of publishing Fintech Business Weekly. I share some reflections on this milestone below.
We’re just three weeks out from Money2020, and my calendar is already starting to fill up. I try to limit to the number of pre-booked meetings I schedule, in order to allow for some serendipitous run ins, but if you have a strong pitch on why we should schedule time to catch up, feel free drop me a line.
Reflecting On 5 Years of Fintech Business Weekly
This isn’t really explicitly about banking and fintech, but rather some thoughts and lessons from five years of publishing this newsletter. If that doesn’t sound interesting to you, feel free to skip ahead to the next story.
It’s hard to believe it has been five years since I wrote the first installment of Fintech Business Weekly.
October 2020: what a time. It was pre-vaccine COVID, I was temporarily living in a mansion in Amsterdam (ask me about that story sometime) and had, together with my partner, just bought a home in Utrecht, where I sit writing this now.
It goes without saying that a lot has changed since then, in my career, in fintech/banking, and in the world.
As those who have heard me talk about my journey already know, part of the decision to start writing the newsletter was born out of frustration with much of the content in the corners of the fintech space I inhabited at the time.
Then and now, mainstream business press outlets understandably tend to only cover the very largest companies in the fintech space.
Legacy trade publications hide behind prohibitively expensive paywalls, and, lacking first-hand knowledge or operating experience in fintech and banking, often rely on the same handful of industry sources to provide analysis through supporting quotes.
And, back in 2020, it felt like much of the fintech-specific trade press and emerging industry influencers were more cheerleaders for the companies they were covering, rather than applying an analytical lens to their business models, marketing claims, and, yes, legal and regulatory compliance practices.
When I began writing publicly, the intention was to offer a voice I felt was lacking in the space. Since then, I’ve watched and participated in a growing network of thought leaders, industry analysts, and, if you must, “influencers.”
Initially, I viewed writing as a lead generation mechanism for independent consulting work.
As Fintech Business Weekly gained traction (and as I realized consulting, as a business, scales terribly), I made a conscious decision to reorient and spend more of my time on media projects, whether the newsletter, podcasts, webinars, or public speaking engagements.
Over the course of 366 newsletters and podcasts, my depth of understanding of banking, fintech, and even crypto has improved by orders of magnitude.
And looking at my early posts, my skills as a writer have also markedly improved. I fully believe that, in an era of LLM-generated text, the ability to source new information, think critically, and argue persuasively is an even stronger differentiator than in a pre-AI world.
The topics I care about and focus on have evolved (ha) over time, but there have been consistent through lines.
In a world of seemingly ever-increasing financial and technological complexity, consumers are on inherently uneven footing vs. the corporations that are selling them products and services.
Consumer protection legislation and regulation, like the Fair Credit Reporting Act, the Equal Credit Opportunity Act, and Dodd-Frank’s prohibition on Unfair, Abusive, and Deceptive Acts and Practices are intended to curb companies’ worst excesses, though, I would argue, with decidedly mixed results, even in the best of times.
Covering fintech and banking with a more analytical and critical lens, including consumer protection issues, hasn’t always won me friends.
But the role of media includes uncovering facts and providing accountability. Those are responsibilities I take seriously, even in the rare cases where fulfilling them results in attacks, whether personal or professional, in public or in private. Such responses won’t dissuade my reporting.
If anything, the frequent lack of objective counterarguments reinforces the need for this kind of reporting. I strive for transparency between facts I’m able to verify from multiple, credible sources and my opinions and believe the industry, as a whole, benefits from the transparency I seek to bring.
Looking at the media landscape in 2025, it is more fractured and noisier than ever, and that is not a trend that seems likely to reverse.
Whether politics, fintech and banking, crypto, or even sneakers, there is niche media that speak to any topic. Seemingly everyone has a newsletter or podcast, and every venture capitalist, company founder, and CEO, especially in the B2B space, is an aspiring thought leader on LinkedIn or Twitter.
There are arguably plenty of upsides to this “democratization,” but it also comes with challenges for content consumers. What is the agenda of the person publishing the content? It’s understandable that a VC or CEO is going to be talking their own book, but are there undisclosed conflicts of interest that are shaping the points of view populating your LinkedIn feed or podcast app?
I won’t pretend that I’m immune to this. We all have to make a living. But I continue to endeavor to stay on the right side of any actual or perceived conflicts of interest, even when doing so requires turning down business opportunities.
I never imagined when I first started writing Fintech Business Weekly five years ago that it would grow to reach 90,000 people (without a single dollar spent on marketing!), nor that I would end up writing a book on the topic that perhaps I’ve become best known for, bank-fintech partnerships.
If you’ve made it this far, thank you for indulging me, and thank you for your loyal readership and support. Here’s to another five years!
Five-year anniversary special: Support Fintech Business Weekly and enjoy member-only benefits by signing up for an annual subscription and save 20% for the life of the subscription.Stablecoin Flyby: Coinbase Goes Scorched Earth to Protect “Rewards,” Bloomberg’s Bad Take, Circle Explores Reversible Transactions, Cloudflare Launches NET Dollar
Now that stablecoins have the imprimatur of regulatory legitimacy, even if implementing regulations and required compliance are more than a year off, collaboration between the traditional financial sector and the nascent but rapidly growing stablecoin industry seems to be accelerating.
That doesn’t mean everything is puppies and roses, however. Bank lobbyist groups, who seemingly were asleep at the wheel as GENIUS sailed through Congress, are pushing back on certain provisions of the law.
The biggest fight is over what the banking industry is describing as a “loophole,” in that entities other than permitted payment stablecoin issuers — crypto exchanges, wallets, etc. — have no restrictions on paying “rewards” or other material consideration in return for users holding certain stablecoins on their platform.
The crypto industry, most vocally represented by Coinbase, its animated CEO Brian Armstrong, and the Blockchain Association aren’t taking the threat of a potential rollback of aspects of GENIUS lying down.
Coinbase Offers 10.8% Yield, Argues Regulating Stablecoin “Rewards” Is A “Bailout” For Banks
Coinbase advertises users can earn up to 10.8% on their Circle-issued USDC held on the platform. How can Coinbase facilitate such outsized yields on stablecoins, when the yield on one-year Treasuries is hovering around 3.6%? By lending it out.
Coinbase has integrated with an “onchain lending protocol” Morpho and defi infrastructure platform Steakhouse Financial to enable Coinbase users to lend USDC they hold and earn that higher rate of return.
Counterparties seeking to borrow USDC — functionally, a synthetic dollar — do so by pledging a crypto asset, most commonly variants of bitcoin or ether. The transactions are over collateralized, meaning, for example, a borrower would pledge $200 worth of bitcoin to borrow $100 worth of USDC (illustrative only).
In theory, the over-collateralization protects the lender of USDC from risk of default, though it’s not clear to me that in a situation where crypto asset prices decline precipitously, as happened in 2022, if this would fully protect someone lending their USDC from losses.
There’s also the question of what someone pledging a crypto asset to borrow synthetic dollars is doing with those funds. My understanding, albeit based on anecdotal evidence, is that most borrowers are using those funds to buy more crypto, increasing the leverage in the crypto ecosystem and implicitly creating deeper linkages between the crypto and tradfi worlds.
Platforms like Morpho and Steakhouse purport to merely be software, as far as I understand it. The “lending” is happening in decentralized protocols. How these protocols attempt to comply, if at all, with relevant consumer financial regulations, like TILA, ECOA, FCRA, and UDAAP is unclear and worthy of further inquiry.
The traditional banking system is right to be concerned about the risk of deposit flight — an April report from the U.S. Treasury estimates that stablecoins could drain as much as $6.6 trillion in demand and other checkable deposits from the banking system.
The better time to push back on the “rewards” loophole would have been before GENIUS was passed.
Instead, trade groups representing various segments of the US banking industry bizarrely waited until after GENIUS became law to protest provisions, including the “rewards” loophole, that are unfavorable to their stakeholders.
For its part, crypto world is pushing back aggressively on the risk that the regulatory arbitrage the industry bought and paid for with hundreds of millions in campaign donations might get undone. Let’s unpack their arguments.
If you’re not on Twitter (and I hope you’re not, it’s rough over there), Coinbase CEO Brian Armstrong is absolutely melting down at the prospect that efforts by bank trade groups to lobby Congress for changes to the GENIUS Act might be successful.
Armstrong has launched something of a scorched earth campaign, falsely (and, frankly, confusingly) describing the banking industry’s efforts to close what banks describe as loopholes as tantamount to a “bailout” for banks.
The campaign from Armstrong and Coinbase also claims, I would argue misleadingly, that “America Voted Pro-Crypto.” But is that true?
It is true that crypto firms were the largest corporate donors in the 2024 cycle, contributing an aggregate of around $245 million, per CNBC. Crypto accounted for nearly half of all corporate funds in the 2024 cycle, according to non-profit watchdog Public Citizen.
The largest pro-crypto PAC, FairShake, raised about $170 million — but, interestingly, didn’t actually run a single ad about crypto. Instead, it used that war chest to support favored candidates and run opposition ads targeting disfavored candidates on other topics, like the economy, inflation, and healthcare.
The election spending paid off, with the crypto industry getting much of what it wanted, including the “rewards” loophole, in the GENIUS Act.
Corporate spending aside, did America really vote “pro crypto”? The actual statistics on voters’ feelings about crypto don’t paint a convincing picture.
Polling from the pro-crypto advocacy group Digital Chamber characterized 16% of voters as viewing a candidate’s stance on crypto as important and that a candidate being pro-crypto made the respondent more likely to vote for a candidate. These voters spanned both Democratic and Republican parties.
Paradigm, also a pro-crypto group, claimed 5% of voters identify as “single issue crypto voters.”
Yet Federal Reserve survey data show that the share of the US population that holds or used crypto has actually declined by a third since 2021, from 12% of adults to just 8% of adults.
And, according to Pew data released in Oct 2024, just 5% of adults were “extremely” or “very” confident in the reliability and safety of cryptocurrencies, while 63% of adults were “not at all” or “not very” confident in the reliability and safety of crypto.
It seems rather unlikely to me that Congress would revisit GENIUS, but Armstrong, Coinbase, and the wider industry via the Blockchain Association seem to view the push from the bank industry as a credible threat worthy of response.
The effort may also serve as a not so subtle reminder to lawmakers that crypto-aligned PACs have more than $200 million on hand to spend in the 2026 midterm elections.
Venmo, Owned By PayPal, Offers “Rewards”… For Holding PayPal’s Stablecoin, PYUSD
Venmo and PayPal provide an even clearer example of this “rewards” loophole.
While PayPal is the user-facing brand tied to PYUSD, the company partners with Paxos as the actual issuer for its stablecoin.
So while the GENIUS Act may prohibit Paxos from paying interest on PYUSD, the law doesn’t speak to PayPal or its subsidiary Venmo offering “rewards” for holding the stablecoin on their platforms.
Why PayPal and Venmo would do so is pretty clear: to incentivize adoption of PayPal’s fledgling stablecoin, which currently is the sixth largest USD-pegged stablecoin in circulation, at just over $2.5 billion.
For comparison, Tether, the largest USD stablecoin, has $176 billion in circulation as of the time of publication, and Circle’s USDC has about $75 billion.
Updated on 10/5/2025 to clarify that Paxos is the issuer of PayPal’s PYUSD stablecoin.
Bloomberg’s Bad Take On Stablecoins
Bloomberg’s editorial board’s recent op-ed tries to speak to a reasonable middle ground on the “rewards” fight, arguing that regulators should “allow stablecoins to offer rewards for payments, just as many credit cards do, and also permit businesses to provide discounts or other perks to customers who use them.”
But if stablecoin issuers want to “compete for deposits,” they should apply for bank charters, the editorial board argues.
That is a reasonable enough argument, though if stablecoin issuers are merely functioning as a narrow bank, by parking their reserves in risk-free short duration Treasuries, I’m not convinced that requiring them to be fully-chartered commercial banks is the right approach either.
The argument I take issue with in Bloomberg’s op-ed is this one:
No doubt, the payments industry is ripe for change. Countries such as Brazil and India have rapidly deployed systems that allow consumers and businesses to transmit money instantly and for free, or nearly free. But US banks have been slower to adopt similar technology, citing concerns about fraud and the cost of new infrastructure.
What Bloomberg conveniently fails to mention is that Pix was developed and is owned and operated by Brazil’s central bank. Financial institutions with more than 500,000 customers are required to support Pix, and the Brazilian regulator prohibits charging consumers for peer-to-peer and consumer-to-merchant transactions. Financial institutions are permitted to charge businesses for accepting Pix payments, but these rates are lower than typical interbank transfers or card transactions.
Similarly, in India, UPI was developed and is operated by the National Payments Corporation of India. NPCI is a public sector not-for-profit that is a join initiative of the Reserve Bank of India, the country’s central bank, and the Indian Banks’ Association. RBI requires nearly all banks, payment service providers, and third-parties to support UPI. The costs of UPI are regulated. Consumers are not charged fees, whether sending or receiving money, for both peer-to-peer or bank-to-merchant. For bank-based transactions, neither senders nor receivers pay any service charge, regardless of the payment amount or frequency.
Bloomberg argues that stablecoins “provide a fast and cheap method of transferring cash, something American consumers badly need.” Yet Americans already have not one but two instant payment rails: The Clearing House’s Real-Time Payments and the Federal Reserve’s FedNow.
The piece that is missing, if you’re looking for the ubiquitous, free or inexpensive instant payments available in Brazil or India, is the mandate that banks support the networks and regulation of the fees they can charge. Something tells me Bloomberg’s editorial board wouldn’t argue in favor of this.
Circle Exploring Ability To Reverse Stablecoin Transactions
Meanwhile, in a sign of the inherent tension between crypto’s origin story and the broader industry’s desire to make further inroads into the traditional financial system, USDC-issuer Circle is exploring allowing transactions to be reversed.
Circle president Heath Tarbert told the Financial Times, “We are thinking through . . . whether or not there’s the possibility of reversibility of transactions, right, but at the same time, we want settlement finality. So there’s an inherent tension there between being able to transfer something immediately, but having it be irrevocable.”
Such a capability would be a stark departure from the immutable nature of blockchain that proponents laud. Perhaps more importantly, allowing for disputes and reversals is incompatible with the idea of instant settlement.
Proponents of the original decentralization vision of crypto weren’t pleased with the news. One user argued on Twitter, “USDC is announcing reversible transactions. We’ve lost the plot. USDC is fiat on a surveillance ledger. This isn’t crypto, it’s tyranny. Freedom Dollar fixes this.”
Cloudflare Announces NET Dollar To “Support a New Business Model for the AI-Driven Internet”
Internet infrastructure company Cloudflare announced last week it is launching its own stablecoin, NET Dollar, which it claims will “support a new business model for the AI-driven internet.”
Cloudflare, if you’re unfamiliar, operates a global network that makes websites, applications, and networks faster and more secure by providing content delivery, cybersecurity, and DNS services that protect against attacks and optimize performance for millions of Internet properties worldwide.
The company’s infrastructure supports about 20% of all websites and 17.2% of all internet traffic.
Cloudflare’s thesis with NET Dollar is that a future where AI agents are performing tasks for users autonomously requires an “internet-native” payment system.
The company also argues that payments — facilitated by its stablecoin — could enable AI firms to pay publishers/creators for accessing their content. This would allow “AI companies to contribute back to the ecosystem that fuels them by compensating content sources fairly,” the company says.
While Cloudflare is well positioned, given its massive reach, the likelihood of its NET Dollar gaining traction for either of these use seems a bit far fetched.
AI agents making purchases on behalf of consumers feels like an inevitability at this point, companies that already provide payment acceptance for merchants would seem to have a significant headstart in winning on this emerging use case.
As far as AI bots making micro-payments for accessing sites’ APIs or content, Silicon Valley has been promising this as a “fix” for the original sin of the internet — ad-dependent business models — for ages (wasn’t web3 supposed to do this?), but the vision has never come to fruition.
Further, the AI companies themselves have every reason to resist this future. Unless forced to do so at the threat of a lawsuit, why would AI firms, which are massively unprofitable at the moment, start paying for their raw materials?
Everything Else: Javice Heading to Prison, Nubank Applies for OCC Charter, CFPB Prioritizes Alleged “Debanking”
Charlie Javice, convicted of fraud in the sale of her college financial aid startup Frank to JPMorgan Chase, was sentenced to just over seven years in prison last week.