Coinbase CEO Brian Armstrong Pushes for Interest on Stablecoins

Stablecoins, digital currencies pegged to fiat currencies like the U.S. dollar, have gained significant traction in the cryptocurrency market. These digital assets are typically backed 1:1 by the dollar and held in low-risk assets such as U.S. Treasuries. Currently, the interest earned from these reserves is retained by the issuers, with consumers receiving no direct benefit.

In an article Armstrong posted on X, he proposes that allowing stablecoin issuers to share interest with consumers would democratize access to market-rate yields, providing regular individuals with opportunities to maintain and grow their wealth. He points out that while the Federal Funds rate averaged 4.75% in 2024, most consumers earned less than 0.5% on their savings accounts, with some receiving as little as 0.01%. This disparity, coupled with an inflation rate around 3%, results in a real loss of purchasing power for many Americans. He posted an article on X:

Beyond domestic benefits, Armstrong highlights the potential of onchain interest to promote financial inclusion globally. Billions of people in underbanked regions lack access to stable financial systems or are subject to volatile local currencies. By enabling interest-bearing stablecoins, the U.S. could facilitate a new wave of global users accessing an instant, transparent, and accessible financial system with just an internet connection. This system would eliminate the need for physical bank visits and reduce excessive fees, offering equal financial access powered by blockchain technology.

Armstrong also emphasizes the economic advantages of allowing onchain interest. Stablecoin issuers are among the largest buyers of U.S. Treasuries, surpassing many foreign governments. If consumers worldwide could earn interest on U.S. stablecoins, the resulting increase in adoption would boost demand for Treasuries, reinforce dollar dominance, and stimulate economic activity through higher consumer spending and investment. Armstrong suggests that more yield in consumers' hands would lead to increased spending, saving, and investing, fueling economic growth in local economies where stablecoins are held.

Currently, two federal stablecoin bills are under consideration: the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act and the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act. Neither bill, in its current form, permits stablecoin issuers to offer interest to consumers. The STABLE Act includes a provision prohibiting payment stablecoin issuers from paying yield to holders, while the GENIUS Act excludes interest-bearing instruments from its definition of a payment stablecoin.

Armstrong urges Congress to act swiftly to amend these legislations, ensuring that regulated stablecoins can deliver onchain interest without triggering complex disclosure requirements or securities classifications. He warns that failing to unlock onchain interest could result in the U.S. missing out on billions in potential global financial flows. With a pro-crypto administration and Congress actively working on stablecoin regulation, Armstrong sees a unique opportunity to modernize the financial system to benefit consumers and keep innovation within the U.S.

The proposal has garnered support from various industry experts. Matt Hougan, Chief Investment Officer at Bitwise, expressed his approval, stating that allowing yield-bearing stablecoins would benefit consumers and foster innovation. He criticized arguments against such measures, suggesting that free markets will develop new ways for customers to access loans and other financial services.

Armstrong's advocacy for onchain interest reflects a broader push to integrate digital currencies more seamlessly into the financial system. By enabling stablecoin issuers to offer interest, consumers gain access to better yields, financial inclusion is expanded globally, and the U.S. economy stands to benefit from increased demand for dollar-denominated assets. As legislative discussions continue, the outcome will significantly influence the future landscape of digital finance and its role in the global economy.