Some crypto executives are pushing Congress to let stablecoin issuers pay interest on their tokens. This is happening while lawmakers are working on a bill to set rules for stablecoins, which are cryptocurrencies tied to the U.S. dollar.
But not everyone is on board with the idea. According to Reuters’ report, some lawmakers have mixed opinions, and financial experts are concerned that allowing interest-bearing stablecoins could make people move their money from regular bank accounts to crypto accounts that aren’t insured.
Stablecoins are a kind of cryptocurrency that is pegged to a stable price, usually 1.1 times the value of the U.S. dollar. Crypto traders use the tokens to move money rapidly between different types of digital coins.
Those who support stablecoins say they could also be used for quick payments, making transactions cheaper and faster. Some executives in the crypto world and Congress argue that stablecoins should act like cash, while others think they should be treated like bank deposits, which can earn interest.
Brian Armstrong, the CEO of Coinbase, weighed in on the debate: “The government shouldn’t put its thumb on the scale to benefit one industry over another.” He believes both banks and crypto companies should be allowed to share interest with consumers
Companies that issue stablecoins, like Tether and Circle, keep assets like U.S. Treasuries to back their tokens. They make money from these assets but don’t share that profit with people holding the stablecoins.
Chen Arad, co-founder of Solidus Labs, said, “Issuers already hold the assets. There’s some yield on them, so it will make sense to allow them to also share that with the depositors.”
As Congress works on the stablecoin bill, both the Senate and House of Representatives have put forward different versions of the bill. The House version bans paying interest, while the Senate version doesn’t fully ban it. Some lawmakers, like Rep. French Hill, say there isn’t enough agreement yet on how to treat stablecoins.
The American Bankers Association is against paying interest, saying it could hurt the banking system. However, some experts like Navin Gupta from Crystal Intelligence believe paying interest could benefit consumers, even though there are risks. The White House wants to pass the stablecoin bill by August, but they haven’t taken a clear stance on the issue yet.
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