CEO Coinbase Calls for Legalization of “On-Chain Interest”

In a significant push towards financial innovation, Brian Armstrong, CEO of Coinbase, has urged lawmakers in the United States to amend current legislation concerning stablecoins. He advocates for the legalization of “on-chain interest,” which would empower issuers to share profits generated from reserves with asset holders.

The Case for Legalizing On-Chain Interest

Armstrong argues that both banks and crypto companies should have the right to distribute interest with their clients, aligning with a free-market approach. Stablecoin issuers typically hold reserves in low-risk assets like U.S. Treasury bills (T-bills), which had a yield of 4.75% in 2024. This stands in stark contrast to the meager 0.41% offered by savings accounts.
With an inflation rate hovering at around 3%, the real purchasing power of Americans decreased by 2.5% in 2024. Armstrong posits that legitimizing on-chain interest could counteract this issue by providing consumers an avenue to earn over 4% returns by holding stablecoins instead of traditional savings accounts, some of which offer as little as 0.01%.

Broader Economic Implications

Armstrong underlines several key advantages: American consumers would benefit from higher returns; globally, billions without access to banking services could find stability against currency volatility; and it would bolster U.S. economic dominance since stablecoin issuers are among the largest holders of T-bills.
“If we fail to legalize on-chain interest, the U.S risks losing billions in additional dollar users and trillions in potential cash flows,” Armstrong warns.

The Legislative Landscape

The U.S is currently considering two bills related to stablecoin regulation—STABLE and GENIUS—with both containing clauses that effectively prohibit issuers from paying interests on stablecoins. For instance, STABLE explicitly states: “A licensed issuer may not pay interest or other returns on its stable coins.”
This prohibition likely stems from concerns that such practices might classify stablecoins as securities. Armstrong calls for a reconsideration of these provisions.
In contrast, industry developments suggest competitive pressures are mounting; one Tether co-founder plans to introduce a competitor to USDT that promises revenue sharing from issuance proceeds.
In conclusion, embracing on-chain interest could unlock economic opportunities both domestically and globally while ensuring stablecoins remain a powerful tool within the financial ecosystem.