Coinbase CEO Calls for US Legislation to Allow 4% Stablecoin Interest

Coinbase CEO Brian Armstrong has called for legislative changes in the US to enable stablecoin holders to earn "onchain interest" on their holdings. In a post on X, Armstrong argued that crypto companies should be treated similarly to banks, allowing them to share interest with consumers. He believes that this approach would be consistent with a free market system.

Ask Aime: What are the potential implications of Coinbase CEO Brian Armstrong's proposal for onchain interest on stablecoins for the crypto market and users?

Armstrong's proposal comes at a time when two competing pieces of federal stablecoin legislation are being considered: the STABLE Act and the GENIUS Act. He suggested that the US has an opportunity to level the playing field and ensure that these laws allow regulated stablecoins to deliver interest directly to consumers, similar to traditional savings or checking accounts.

Armstrong argued that stablecoins have already found product-market fit by digitizing the dollar and other fiat currencies. He believes that the addition of onchain interest would allow the average person and the US economy to reap the full benefits. If legislative changes allowed stablecoin issuers to pay interest to holders, US consumers could earn a yield of around 4% on their holdings, significantly higher than the average interest yield on a consumer savings account.

He also highlighted that onchain interest could benefit the broader US economy by incentivizing the global use of US dollar stablecoins. This could see their use grow, pulling dollars back to US treasuries and extending dollar dominance in an increasingly digital global economy. Armstrong also argued that a higher yield than traditional savings accounts would result in more spending, saving, and investing, fueling economic growth in all local economies where stablecoins are held.

Currently, neither the STABLE Act nor the GENIUS Act gives the legal go-ahead for onchain interest-generating stablecoins. In fact, the STABLE Act includes a passage prohibiting "payment stablecoin" issuers from paying yield to holders. Similarly, the GENIUS Act has been amended to exclude interest-bearing instruments from its definition of a "payment stablecoin."

Armstrong's call for legislative change is part of a broader push to integrate digital currencies more seamlessly into the financial system. By allowing stablecoins to generate interest, he believes that this would promote a win-win situation for both consumers and the US economy. Consumers would have access to a new form of passive income, while the economy could benefit from increased adoption and use of digital currencies.

In summary, coinbase CEO Brian Armstrong's call for legislative changes to allow stablecoin holders to earn onchain interest is a significant development in the digital currency landscape. By advocating for rules that benefit consumers and promote economic growth, Armstrong is pushing for a more inclusive and equitable financial system. As stablecoin legislation continues to move through Congress, Armstrong's proposal could pave the way for new opportunities in the digital currency space, benefiting both consumers and the broader economy.