Here's the skinny on Stablecoins and Onchain Interest
Stablecoin Legislation Advocacy by Coinbase CEO: Interest-Bearing Provisions Proposed
Coinbase's big shot, Brian Armstrong, is pushing for a change in the stablecoin laws, allowing holders to earn "onchain interest" – similar to what you'd get from a regular savings account. But here's the catch: current laws don't let stablecoins pay interest to their holders.
Armstrong thinks this is a missed opportunity. Why? Because, he believes consumers could earn a whopping 4% yield compared to the measly 0.41% from average savings accounts. And guess what? This could help boost the economy and give the almighty dollar a global reign.
But here's the plot twist: stablecoin issuers already hold reserves in US Treasuries. The problem? They usually keep the interest for themselves instead of sharing it with the holders. Armstrong calls this "onchain interest" – a stablecoin's ability to function as a form of payment and deliver interest earned on reserve assets directly to the holder.
So, Armstrong thinks allowing onchain interest could incentivize the use of US dollar stablecoins, expand dollar dominance in a digital economy, and create more spending, savings, and investment – all fueling economic growth. If we don't jump on this bandwagon, Armstrong warns, we could miss out on billions of USD users and trillions in potential cash flows.
The crypto industry seems to back Armstrong. Bitwise's Chief Investment Officer, Matt Hougan, supports the idea and questions the opposition to yield-bearing stablecoins. He suggests free markets will develop new ways for customers to get loans to buy houses if stablecoin issuers offer interest.
But, there's a catch: regulatory experts think yield-bearing stablecoins could face complex regulations due to similarities with securities. That's probably why current legislation avoids provisions for interest-bearing features. Right now, the GENIUS Act explicitly bans yield-bearing stablecoins, but there's ongoing discussion about potential amendments.
With a pro-crypto administration and Congress working on stablecoin regulation, Armstrong thinks we have a unique chance to modernize the financial system. We can either modernize it to benefit consumers or protect an outdated system that enriches middlemen. And, remember, this could open the door for financial access for billions in underbanked regions.
TL;DR
- Brian Armstrong wants to change laws to let stablecoin holders earn interest like in a savings account.
- Current laws don't allow for interest-bearing stablecoins.
- Armstrong thinks this could help the economy, give the dollar global dominance, and offer higher returns for consumers.
- The crypto industry supports this move, but there could be complex regulations due to similarities with securities.
- Laws are being reworked, so there's potential for change in the future.
- In a push for financial modernization, Brian Armstrong proposes leveraging technology to enable stablecoins to pay "onchain interest" akin to banking savings accounts, potentially offering higher returns and boosting the economy.
- Despite the potential benefits of yield-bearing stablecoins, there may be complex regulatory hurdles due to their similarities with securities, as depicted by the current prohibition outlined in the GENIUS Act.
- As the crypto industry and lawmakers deliberate on stablecoin regulation, the opportunity arises to construct a more accessible and consumer-friendly financial system, with the potential to extend financial services to billions in underbanked regions.
