Coinbase CEO Advocates for Changes in Stablecoin Laws to Allow ‘Onchain Interest’

In a recent post on X (formerly Twitter), Coinbase CEO Brian Armstrong called for changes in US legislation to allow stablecoin holders to earn “onchain interest” directly from issuers. Armstrong's proposal aims to level the playing field between crypto companies and traditional banks, allowing stablecoin issuers to incentivize consumers with interest payments in a similar way to how savings accounts function at banks.

Legislative Change Needed for Stablecoins to Offer Onchain Interest

Currently, two competing pieces of legislation, the Stablecoin Transparency and Accountability for a Better Ledger Economy (STABLE) Act and the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, are working their way through the US legislative process. However, neither of these bills includes provisions that would allow stablecoin issuers to pay interest directly to holders.

Armstrong emphasized that such a change would not only benefit consumers but could also provide significant economic advantages for the broader US economy. He believes that allowing stablecoin issuers to offer onchain interest would be consistent with a free-market approach, enabling consumers to benefit from higher returns on their holdings compared to traditional savings accounts.

Onchain Interest Could Benefit Consumers and the US Economy

In his post, Armstrong argued that the ability for stablecoin issuers to pay interest directly to consumers would enable the average American to earn a yield of approximately 4% on their stablecoin holdings. This would be a substantial increase compared to the 0.41% average interest rate currently offered on consumer savings accounts in 2024.

By allowing onchain interest, Armstrong explained that stablecoins could become even more attractive to global users. This would encourage greater adoption of US dollar-backed stablecoins worldwide, potentially leading to more capital flowing back to US treasuries. This could help maintain the dominance of the US dollar in an increasingly digital global economy.

Additionally, Armstrong noted that providing consumers with a higher yield on their stablecoin holdings would stimulate economic activity, leading to increased spending, saving, and investment, which in turn could fuel growth in local economies where stablecoins are used.

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

Current Legislation Does Not Allow Interest Payments on Stablecoins

As it stands, neither the STABLE Act nor the GENIUS Act allows for stablecoin issuers to pay interest to holders. In fact, the STABLE Act includes a provision that specifically prohibits “payment stablecoin” issuers from offering yield to consumers. The GENIUS Act, which recently passed the Senate Banking Committee by a vote of 18-6, has also been amended to exclude interest-bearing stablecoins from its definition of “payment stablecoins.”

Despite these setbacks, Armstrong remains hopeful that legislative progress will allow for a future in which stablecoin issuers can share interest with consumers, ultimately driving the growth of the broader digital asset market.

Conclusion

Coinbase CEO Brian Armstrong’s call for legislative changes reflects the growing interest in stablecoin regulation and the broader role digital assets could play in the US economy. By allowing stablecoin issuers to offer onchain interest, Armstrong believes consumers could benefit from higher returns on their holdings, while the US economy could see more dollars flowing back to US treasuries, bolstering the dollar’s global standing.

However, for these changes to become a reality, lawmakers must address the current gaps in the STABLE Act and the GENIUS Act. As these bills continue to progress, Armstrong’s push for onchain interest could ultimately reshape how stablecoins interact with the global financial system.