Coinbase CEO Brian Armstrong calls on lawmakers to support Stablecoin legislation

Coinbase CEO Brian Armstrong called on U.S. lawmakers to support a stablecoin bill that allows consumers to earn interest income directly from their dollar stablecoin holdings. He believes this move will be a "win-win" situation.

Armstrong elaborated on this view in a blog post on March 31 and argued that the next stage of stablecoin innovation must include the "OnChain Interest" mechanism. The mechanism will allocate the proceeds generated by stablecoin reserve assets, such as short-term U.S. Treasury bonds, to stablecoin holders.

Currently, stablecoin issuers face legal uncertainty as they cannot share interest with users without violating securities laws or engaging in activities deemed to be “investment banking.” Banks have long enjoyed regulatory exemptions for providing interest accounts, while stablecoin issuers lack such exemptions.

Armstrong believes:

"Consumers should get more. Open on-chain interest will drive us to improve the system, ultimately benefit consumers and drive this innovation to grow within the United States."

A fairer financial future

Stablecoins have been widely adopted as a digital representative of fiat currencies, but Armstrong believes its potential has not been fully released. He pointed out that although the average federal funds rate in 2024 is 4.75%, the interest income of most consumer savings accounts is well below 0.5%, or even below the inflation rate (about 3%), resulting in a decline in actual purchasing power.

Armstrong pointed out:

“On-chain interest will democratize gains in market interest rates, allowing ordinary people to maintain and increase wealth more equitably.”

He further highlighted the potential of stablecoins to change financial channels globally. Billions of people around the world cannot easily obtain the dollar or are forced to use local currencies with unstable value and rapidly depreciating.

By allowing stablecoins to claim interest, the United States can attract a large number of new users around the world, creating a financial system that is instant, transparent and easy to access with just an internet connection.

Armstrong added:

“No bank outlets are required, no high overdraft fees or remittance fees. This is a financial channel that is equal to everyone, powered by cryptocurrencies.”

Strategic Advantages to the U.S. Economy

Armstrong also explains how to combine the allowable on-chain interest on stablecoin with broader U.S. economic policy goals.

Stablecoin issuers are already one of the main buyers of U.S. Treasury bonds, and their purchases are even more than many foreign governments. If global consumers can earn interest from dollar stablecoins, the resulting increase in adoption will further increase demand for government bonds, enhance the dollar's position in the global financial system, and stimulate economic growth through higher consumer spending and investment.

Armstrong said:

“More interest from consumers means more spending, savings and investments – which will boost growth across the economy holding stablecoins.”

However, Armstrong warns that the U.S. could miss trillions of dollars in global financial flows in the coming decades without promptly incorporating on-chain interest into new stablecoin legislation. He urged lawmakers to quickly formulate clear legal provisions to ensure regulated stablecoin issuers can allocate interest to users without triggering complex disclosure requirements or exposing issuers to the securities laws.

Armstrong concluded:

“At a time when the government and Congress are actively involved in stablecoin regulation, we have a unique opportunity. We can modernize the system to benefit consumers or stick to an outdated middle-level institutional model.”

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