Coinbase CEO urges stablecoin law reforms for ‘Onchain Interest’

The CEO of Coinbase is advocating for reforms in stablecoin regulations to allow the integration of ‘onchain interest.’

Brian Armstrong, the CEO of Coinbase, says allowing stablecoin issuers to offer interest payments to holders would ensure that both consumers and the US economy fully capitalize on the benefits.

Armstrong calls for regulatory updates and seeks to grant stablecoin holders in the US the ability to earn “onchain interest.”

On March 31, Armstrong posted on X and asserted that crypto companies should have the same privileges as banks and be both allowed and motivated to pass interest on to consumers.

According to him, embracing onchain interest would reflect a commitment to free market principles.

The US legislative process is currently addressing two competing stablecoin bills: the Stable Transparency and Accountability for a Better Ledger Economy (STABLE) Act, which enhances transparency, and the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, which promotes stablecoin innovation.

Armstrong points out that the US could use this legislation to “level the playing field and ensure these laws pave a way for all regulated stablecoins to deliver interest directly to consumers, the same way a savings or checking account can.”

According to Armstrong, stablecoins have already proven their market viability by transforming fiat currencies into digital assets. Adding onchain interest would maximize advantages for both individuals and the US economy.

He points out that if stablecoin issuers were permitted to pay interest, consumers in the US could see returns of around 4%, a substantial increase over the 0.41% average savings account rate in 2024.

He believes that onchain interest could strengthen the US economy by incentivizing the worldwide use of stablecoins pegged to the US dollar.

He suggests that this could see their use grow, “pulling dollars back to U.S. treasuries and extending dollar dominance in an increasingly digital global economy.”

He emphasizes that the prospect of higher returns than traditional savings accounts would lead to “more yield in consumers’ hands means more spending, saving, and investing — fueling economic growth in all local economies where stablecoins are held.”

“If we don’t unlock onchain interest, the U.S. misses out on billions more USD users and trillions in potential cash flows,” Armstrong added.

As it stands, neither the STABLE Act nor the GENIUS Act authorizes the use of onchain interest-generating stablecoins.

The STABLE Act, in its existing form, features a specific rule that prevents “payment stablecoin” issuers from distributing yield to holders.

Similarly, the GENIUS Act, after passing the Senate Banking Committee with an 18-6 vote, was updated to exclude interest-generating instruments from the definition of a “payment stablecoin.”

In an interview with Eleanor Terrett on the Crypto in America podcast, Representative Bryan Steil noted that after a few additional drafting rounds, the two legislative pieces are likely to “mirror up” since the differences between them are mainly in text rather than in core substance.

“At the end of the day, I think there’s recognition that we want to work with our Senate colleagues to get this across the line,” Steil said.