As the U.S. Congress inches closer to passing groundbreaking legislation for stablecoins, some of the most influential figures in the cryptocurrency world are making a last-ditch effort to change the bill. This lobbying push focuses on allowing stablecoin issuers to pay interest on U.S. dollar-pegged tokens, a move that could reshape the future of cryptocurrency and its interaction with the traditional banking system.
Stablecoins, a type of cryptocurrency designed to maintain a stable value (usually pegged 1:1 to the U.S. dollar), have gained widespread popularity, especially among crypto traders who use them to easily transfer funds between tokens. However, the question of whether stablecoins should be treated as cash or as bank-like deposits—earning interest—has sparked heated debates among lawmakers and industry executives.
The Lobbying Push
Prominent figures like Coinbase CEO Brian Armstrong argue that both crypto companies and traditional banks should have the freedom to share interest with consumers. Armstrong’s statement on social media emphasized that the government shouldn’t favor one industry over the other, suggesting that crypto companies should be allowed the same benefits as banks when it comes to earning and sharing interest.
At present, companies that issue stablecoins, such as Tether and Circle, hold cash-equivalent assets like U.S. Treasuries to maintain their 1:1 dollar peg. These issuers earn yields on these assets, but they do not pass this yield on to the holders of their stablecoins. Crypto advocates, such as Chen Arad, co-founder of Solidus Labs, argue that it would make sense to allow issuers to share these yields with stablecoin holders.
This lobbying effort is intensifying as Congress seems poised to pass its first-ever stablecoin regulatory framework. The House and Senate are both pushing forward bills to regulate stablecoins, but the details differ, particularly regarding whether stablecoin issuers can pay interest. The House bill explicitly bans interest-bearing stablecoins, while the Senate bill remains less clear on this issue.
The Debate: Is This the Right Move?
Opinions remain split on whether stablecoins should be allowed to bear interest. Proponents, like Dante Disparte from Circle, argue that payment stablecoins are more like “regulated electronic money” and that paying interest should be a decision made by the platform where the stablecoins are traded, not the issuer itself.
However, some lawmakers are still wary of allowing interest-bearing stablecoins, fearing it could destabilize the banking system. Arthur Wilmarth, a professor at George Washington University, expressed concerns that allowing interest on stablecoins could siphon deposits away from traditional banks, weakening their ability to lend money and support the economy.
The Political Landscape
The growing lobbying efforts from the cryptocurrency industry have not gone unnoticed. The sector spent more than $119 million backing pro-crypto congressional candidates in the last election cycle, which has contributed to its growing influence in Washington. At the same time, the banking industry is pushing back, with the American Bankers Association warning that allowing interest-bearing stablecoins could undermine the banking system’s core role in credit intermediation.
The Future of Stablecoin Legislation
With the Trump administration also pushing for the passage of a stablecoin bill before August, the pressure is mounting to find a solution. Bo Hines, who leads Trump’s Council of Advisers on Digital Assets, has not made a statement on whether interest should be allowed but has emphasized the importance of passing stablecoin legislation quickly.
Despite the opposition, proponents argue that allowing stablecoin issuers to pay interest could ultimately benefit consumers by providing more choices in the financial market. It’s clear that stablecoins are becoming a central issue in the ongoing debate about the future of cryptocurrency and its place in the broader financial system.
