Big companies that bank with Citigroup will soon be able to take stablecoin payments at checkout, without ever touching crypto.
Stablecoins are digital tokens pegged to the US dollar. Citi’s new deal with Coinbase lands two weeks after a major crypto bill collapsed in Washington over those same tokens.
How a Stablecoin Payment Becomes Cash at Citi
A customer pays a Citi client in stablecoins. Coinbase, the largest US crypto exchange, catches the payment and swaps it for dollars. Citi then settles the money like any other bank transfer, the Journal reported Monday.
The merchant never holds a single token.
The deal also runs the other way. Coinbase’s payments customers get an account-style product through Citi that turns incoming cash into stablecoins. Those tokens sit at Coinbase and earn a reward of 3.75% a year.
That number is where the trouble starts.
Why Banks Fought Stablecoin Rewards in the Clarity Act
The Clarity Act, a bill to write rules for US crypto markets, failed in the Senate on September 15. It lost a procedural vote 49-50. It needed 60. A fight over stablecoin rewards helped sink it, the Journal reported.
A day before the vote, eight banking groups asked senators to ban those rewards. They warned that interest-paying tokens could drain deposits from banks.
“When deposits decline, it reduces the availability of credit that supports communities and pathways to upward mobility,” the groups wrote in their letter.
One signer was the Financial Services Forum. Its chair is Citi CEO Jane Fraser, according to the Forum.
Her lobby asked Congress to ban stablecoin rewards. Her bank now provides the banking behind a Coinbase product that pays one.
Citi says the Senate defeat changes nothing.
“We are not hampered. We’re continuing to do what we do within the banking license we have, within the regulations we currently have,” Shahmir Khaliq, Citi’s head of services, told the Journal.
What Citi and Coinbase Have Not Said Yet
The report named no merchants using the service and no launch date.
Citi is also bringing its private blockchain for moving company cash to Japan and the United Arab Emirates. It is part of a wider push as banks move into stablecoins.