Coinbase CEO calls for stablecoin legislation to include yield-bearing for consumers

Coinbase CEO Brian Armstrong weighed in on ongoing discussions around stablecoins offering yield-bearing opportunities to US consumers. He argues that regulatory frameworks should not favor one industry over another, stressing that banks and crypto companies should be able to distribute interest to consumers.

Coinbase CEO shares thoughts on stablecoin framework

In an X post on Monday, Coinbase CEO Brian Armstrong shared the need for US lawmakers to permit yield-bearing opportunities for consumers in stablecoin legislation. He argued that these regulations should ensure that banks and crypto companies have equal opportunity — and incentives — to offer interest to consumers.

Armstrong noted that stablecoins have already demonstrated strong market adoption by digitizing fiat currencies like the US Dollar (USD). However, he claimed that a key component remains missing, which is on-chain interest. Armstrong suggested that allowing consumers to earn yield on stablecoin holdings could unlock greater economic benefits for individuals.

Stablecoin issuers hold US Dollar reserves in low-risk investments such as short-term US Treasuries. Armstrong stated that interest earned from these assets is typically retained by the issuer rather than distributed to stablecoin holders. He believes that the solution to this is earning on-chain interest.

Armstrong defines on-chain interest as "the ability of a stablecoin to function as a form of payment and directly deliver interest earned on reserve assets to the stablecoin holder, effectively an interest-bearing checking account."

He sees on-chain interest as a win-win, providing fair yield, benefiting unbanked consumers worldwide and driving economic growth in nations where stablecoins are held. Armstrong stated that the law is yet to catch up with stablecoin tech, highlighting the need for regulations to accommodate newer technological advancements.

The argument fueled similar discussions among other crypto experts, including Bitwise Chief Investment Officer (CIO) Matt Hougan, who expressed displeasure towards arguments against yield-bearing stablecoins.

This stems from a statement allegedly written by Senator Kristen Gillibrand, which suggested that stablecoin issuers offering interest could affect bank deposits and their ability to offer mortgages.

Hougan argues that free markets will develop a new way for customers to get loans to buy houses. He stated that wealthy individuals have already generated ways to bypass the "zero-interest cartel" via money market funds and high-balance interest-bearing accounts.

"Wouldn't it be nice if every American could have easy access to a way to gather interest on their money?", Hougan wrote on X.

US lawmakers are seeking to establish clearer guidelines for stablecoins in the country. Two bills are being passed through the Senate, the GENIUS and STABLE Act, aiming to address stablecoin regulations and foster a better environment for the digital asset class.

However, neither bill makes provisions for yield-bearing in their stablecoin frameworks. Experts argue that yield-bearing could complicate regulations for stablecoin issuers due to their similarity with securities.