Coinbase CEO calls for change in stablecoin laws to enable ‘onchain interest’

Coinbase CEO Brian Armstrong is calling for legislative changes in the US to allow stablecoin holders to earn “onchain interest” on their holdings.

In a March 31 post on X, Armstrong argued that crypto companies should be treated similarly to banks and be “allowed to, and incentivized to, share interest with consumers.” He added that allowing onchain interest would be “consistent with a free market approach.”

Source: Brian Armstrong

There are currently two competing pieces of federal stablecoin legislation working their way through the legislative process in the US: the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act, and the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act.

In reference to the stablecoin legislation, Armstrong said the US had an opportunity 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.” 

Armstrong argued that while stablecoins have already found product-market fit by “digitizing the dollar and other fiat currencies,” the addition of onchain interest would allow “the average person, and the US economy, to reap the full benefits.”

He said that if legislative changes allowed stablecoin issuers to pay interest to holders, US consumers could earn a yield of around 4% on their holdings, far outstripping the 2024 average interest yield on a consumer savings account, which Armstrong cited as 0.41%.

Armstrong also said 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 U.S. treasuries and extending dollar dominance in an increasingly digital global economy,” according to the Coinbase CEO. 

He also argued that the potential for a higher yield than traditional savings accounts would result in “more yield in consumers’ hands means more spending, saving, 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.

Currently, neither the STABLE Act nor the GENIUS Act gives the legal go-ahead for onchain interest-generating stablecoins. In fact, in its current form, the STABLE Act includes a short passage prohibiting “payment stablecoin” issuers from paying yield to holders:

Source: STABLE Act

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Similarly, the GENIUS Act, which recently passed the Senate Banking Committee by a vote of 18-6, has been amended to exclude interest-bearing instruments from its definition of a “payment stablecoin.”

Commenting on the current state of the STABLE Act, Representative Bryan Steil told Eleanor Terrett, host of the Crypto in America podcast, that two pieces of legislation are positioned to “mirror up” following a few more draft rounds in the House and Senate — due to the differences between them being textual rather than substantive.

“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.

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