Crypto Executives Lobby Congress for Stablecoin Interest

The debate surrounding stablecoin regulation has reached new heights as several crypto executives are pushing Congress to allow stablecoin issuers to pay interest on their U.S. dollar-pegged tokens. This proposal has ignited heated discussions among lawmakers, financial institutions, and crypto industry leaders alike.

What Are Stablecoins?

Stablecoins are digital assets pegged to stable assets, such as the U.S. dollar, to minimize volatility. They are widely used for transactions within the crypto space and serve as an alternative to traditional banking systems. Stablecoin issuers hold large reserves, often in U.S. Treasury bonds or other cash equivalents, to maintain the peg to the dollar.

Currently, these issuers generate interest from their holdings but do not share the returns with token holders. Instead, the interest earned remains within the issuing companies. The crypto executives advocating for change argue that it’s unfair for crypto firms to be excluded from offering interest payments while traditional banks do so for their depositors.

The Proposal: Paying Interest on Stablecoins

Proponents of the proposal believe that stablecoin issuers should be allowed to share the interest they earn with token holders. One prominent voice in this push is Coinbase CEO Brian Armstrong, who has criticized the government’s stance on the issue. Armstrong stated, “The government shouldn’t put its thumb on the scale to benefit one industry over another,” highlighting the need for equal treatment between the banking and crypto sectors.

By offering interest, stablecoin issuers could create a new incentive for users to hold digital assets, which could, in turn, encourage broader adoption of cryptocurrencies. This move could potentially open the door for new financial innovations within the crypto space, making stablecoins more competitive with traditional banking products.

Concerns From the Banking Sector

Opponents of allowing interest payments on stablecoins argue that this could disrupt the traditional banking system. The American Bankers Association has voiced significant concerns, suggesting that paying interest on stablecoins could lead to the migration of deposits away from regulated financial institutions, thus destabilizing the banking system.

The banking sector’s main fear is that the ability of crypto companies to pay interest could attract a large number of consumers, diverting capital from banks. This could limit the banks’ ability to provide loans and other financial services, potentially reducing their ability to act as the backbone of the economy. Furthermore, there is concern that such a move could place taxpayers at risk of bearing the costs of any financial losses should stablecoins face issues with liquidity or other risks.

Stablecoin Regulation: Congressional Bills

As the stablecoin regulation debate intensifies, Congress is actively considering bills that would establish a regulatory framework for stablecoins. However, these bills have varied approaches to the issue of interest payments.

The House Financial Services Committee approved a bill on April 2, 2025, that would explicitly prohibit stablecoin issuers from paying interest. This bill seeks to maintain the traditional role of banks in offering financial products and services. Conversely, a bill that passed through the Senate Banking Committee in March 2025 is less clear on this issue, with the GENIUS Act (Growing the Economy with New and Innovative Uses of Stablecoins) being on a fast track for approval due to its bipartisan support.

Despite the differences in the bills, both sides agree that stablecoin regulation is essential for ensuring the stability of the crypto market. However, the inclusion of interest payments as part of this regulatory framework remains a contentious point that will likely continue to be debated in the coming months.

The Future of Stablecoin Regulation

The push for stablecoin issuers to pay interest highlights the evolving nature of cryptocurrency regulation. As the market for digital assets grows, regulatory bodies face increasing pressure to adapt traditional financial rules to accommodate these new technologies. The debate over interest payments underscores the growing importance of stablecoins in the financial ecosystem.

As Congress continues to review the bills and stakeholders on both sides present their arguments, the future of stablecoin regulation will shape the broader crypto landscape. Should interest payments be allowed, it could mark a significant shift in how digital assets are integrated into the global financial system.

Ultimately, the resolution of this debate will have long-lasting implications for the stability and growth of both the crypto and traditional banking sectors.

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