- Coinbase CEO urges lawmakers to allow stablecoins to offer interest to consumers and boost financial inclusion.
- Armstrong says stablecoins could provide higher yields than traditional savings accounts for everyday users.
- Current regulations prevent stablecoin issuers from offering interest despite the potential for economic growth.
Brian Armstrong, the CEO of Coinbase, has urged U.S. lawmakers to implement regulations that would allow stablecoin holders to earn interest on their assets. The push for stablecoin regulatory measures demonstrates the requirement for consumers to receive greater advantages from dollar-pegged digital assets including USDT along with USDC.
His proposed initiative presents a win-win solution for consumers and the economy by accelerating worldwide financial inclusion through sustained growth of the U.S. economy.
On-Chain Interest as a Key Innovation
According to Armstrong financial returns from the reserve assets backing stablecoin would be directed directly to the holders through "on-chain interest." The potential assets for these reserves could consist of low-risk short-term U.S. Treasuries that maintain liquidity.
Users can generate interest from stablecoins in much the same way traditional saving accounts work yet these digital assets do not require physical bank presence. According to Armstrong, payments of interest would be made directly to stablecoin owners through this system which creates an efficient and transparent earnings mechanism for consumers.
Regulatory Barriers and Challenges for Stablecoin Issuers
Armstrong discussed how U.S. stablecoin issuers encounter legislative hurdles despite their potential advantages in the market. Stablecoin issuers encounter major legal uncertainty because they do not receive the same regulatory exemptions that traditional banks enjoy for interest-bearing account offers.
According to the existing STABLE Act, payment stablecoin issuers cannot offer interest-bearing accounts to customers without meeting security law requirements. This regulatory gap has left consumers without access to the benefits that on-chain interest could offer.
Comparison with Traditional Savings Accounts
Armstrong emphasized the major difference between standard savings account yields and stablecoin earning potential. Americans who keep their savings in traditional accounts can earn only 0.41% interest on average while numerous banks offer rates down to just 0.01%. The current Federal Reserve funds rate is set at 4.75% while remaining higher than the existing 0.41% offered by traditional savings accounts.
Armstrong argued that this low yield is inadequate, especially with inflation hovering around 3%. By enabling on-chain interest, stablecoins could provide a 4% yield or more, benefiting everyday consumers who have been historically underserved by traditional banking systems.
Economic Impact and Global Adoption
The Coinbase CEO believes that enabling on-chain interest would not only help U.S. consumers but could also encourage global adoption of stablecoins. By offering a digital, decentralized alternative to traditional savings accounts, the U.S. could create a more inclusive financial system.
Armstrong pointed out that stablecoins would allow users to access financial services without the need for physical bank visits or incurring excessive fees, such as those associated with overdrafts or remittances.
Currently, the STABLE Act and the GENIUS Act do not support the idea of on-chain interest-generating stablecoins. If these bills pass in their current form, they would prevent stablecoin issuers from offering yields to holders, limiting the growth and accessibility of this financial innovation.