The money in stablecoins does not come from nowhere. It comes from short-dated Treasury bills and overnight repo agreements, and the question of who gets to pass that yield through to end users is shaping up to be one of the more consequential plumbing questions in modern finance. A deal announced Monday between Citigroup and Coinbase offers a clean look at how the pipes actually work.
Through an expanded partnership first sketched out at Money 20/20 in October 2025, Citi is now enabling its institutional clients to accept stablecoin payments from customers. The mechanics are deliberately invisible to the corporate treasurer: Coinbase supplies the blockchain rails and automatically converts incoming digital currency into U.S. dollars, while Citi settles the funds as the bank of record. The whole thing runs through Spring by Citi, the bank’s merchant payment platform, which already operates in 23 markets and processes multi-billion-dollar annual volumes.
The corporate client never touches a stablecoin. That is the point.
But the most revealing detail in the arrangement is not the payment rail itself. It is the 3.75% annual interest-like reward that stablecoins held at Coinbase can earn. For a corporate balance sheet sitting on idle digital dollars, that is a tidy return. And the reason it exists — rather than being paid directly by the issuer — tells you something important about how the GENIUS Act is reshaping the economics of stablecoins before it even takes effect.
Here is the mechanism. Circle, the issuer of USDC, earns income by investing its reserves in short-dated U.S. Treasuries and overnight repo agreements through the Circle Reserve Fund, an SEC-registered government money market fund administered by BlackRock. Circle then shares approximately 60% of that reserve income with distribution platforms like Coinbase, according to the company’s 2025 annual report filed with the SEC. Under the GENIUS Act‘s Section 4(a)(11), which prohibits stablecoin issuers from paying interest directly to token holders, Circle cannot pass that yield through to the end user itself. So the money takes a detour: Circle to Coinbase to the client, labeled as a reward rather than interest.
For the corporate treasurer, the distinction is semantic. For the lawyers, it is the difference between compliance and a federal violation. The GENIUS Act, signed in July 2025 and scheduled to take effect January 18, 2027, does not eliminate stablecoin yield. It forces a structural migration of that yield from the issuer to the distribution platform.
The numbers are substantial. Circle’s 2025 annual report showed $2.75 billion in total revenue and reserve income, with $2.64 billion — 96% — coming from reserve income. Of that, $1.66 billion went to distribution and transaction costs, with Coinbase as the largest recipient. Tether, by contrast, retains more per dollar — industry estimates suggest roughly 3.0 to 3.5 cents annually — because it lacks a comparable large-scale revenue-sharing partner. Circle’s model depends on this ecosystem of distributors to keep its product competitive.
Citi, for its part, is not choosing sides. By integrating Coinbase’s existing stablecoin infrastructure, the bank gains immediate access to functional, high-volume digital payment rails. But Citi is simultaneously a founding member of a 21-bank consortium announced in September 2026 — alongside Goldman Sachs, Bank of America, Wells Fargo, Deutsche Bank, UBS, and others — that plans to launch its own USD stablecoin on public blockchains by the first half of 2027. The consortium, advised by BCG and Brunswick Group, intends to compete directly with Circle and Tether.
It is a barbell strategy. Use the established rails of today to capture the multi-billion-dollar processing volumes of tomorrow, while building the infrastructure that might eventually render those same rails unnecessary. Citi’s stablecoin market forecast — $1.9 trillion in the base case, $4 trillion in the bull case by 2030 — suggests the bank sees enough potential upside to justify running both plays at once.
What to watch from here: the finalization of GENIUS Act implementing rules, still in the Notice of Proposed Rulemaking stage, which could clarify — or complicate — the legal boundary between a permissible reward and a prohibited payment of interest. The competitive response from other major banks, particularly whether they follow Citi’s lead in partnering with existing exchanges or rely solely on the consortium. And the consortium’s own timeline, which at H1 2027 leaves little margin for the regulatory and technical coordination that 21 institutions require.
For now, Citi is content to be the bank of record regardless of whether the underlying currency is a government-issued dollar or a tokenized equivalent. That is a pragmatic, slightly dry position. But in a market where the plumbing determines who gets paid, it may also be the most durable one.