In a bold move that signals the growing maturity and influence of the cryptocurrency sector, top crypto executives have urged U.S. lawmakers to amend regulations and allow stablecoin issuers to pay interest to token holders. As the House Financial Services Committee advances the much-debated STABLE Act, which seeks to regulate stablecoins, the latest demand from crypto leaders has reignited a crucial debate: Should stablecoins offer interest like traditional bank deposits?
This request does not just highlight the evolving role of stablecoins in global finance—it also challenges long-standing definitions of money, banking, and regulation.
Understanding the Core Proposal
Stablecoins represent digital tokens typically pegged to a fiat currency, such as the U.S. dollar. They combine the advantages of cryptocurrencies—borderless, fast, and programmable—with the price stability of traditional fiat.
Executives from major blockchain and fintech firms now want these stablecoins to earn and distribute interest to users. At present, issuers like Circle (behind USDC) or Tether do not pay interest on holdings, although they invest the reserves backing these coins and generate yields from them.
If approved, the change would let issuers share these earnings with customers, transforming stablecoins into interest-bearing financial instruments—similar to savings accounts.
Why Crypto Leaders Support Interest Payments
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Enhancing Utility and Adoption
Executives argue that offering interest on stablecoins would dramatically boost their attractiveness and usability. In a world where digital wallets already hold idle balances, giving users a return on their holdings makes stablecoins a better alternative to traditional bank deposits. -
Competing with Banks
Stablecoin issuers want a level playing field. Banks can offer interest on checking and savings accounts, and stablecoins—often held in fintech wallets—could easily provide similar benefits with fewer barriers. With interest-bearing stablecoins, the crypto sector can compete directly with legacy banking systems. -
Transparency and Financial Innovation
Crypto firms already operate with a high degree of on-chain transparency, showcasing reserves and auditing practices. By enabling interest payments, these firms can use smart contracts to ensure automated, fair, and traceable distribution of returns—something banks still struggle to offer consistently. -
Global Financial Inclusion
Interest-bearing stablecoins could change the game for underbanked populations worldwide. A smartphone wallet holding interest-bearing USDC or USDT could function like a borderless savings account, offering returns without requiring access to formal banking.
The STABLE Act and Its Role
The STABLE Act (Stablecoin Transparency and Accountability Act) aims to regulate stablecoin issuance more strictly. It demands that issuers maintain full backing in fiat or high-quality liquid assets and undergo regular audits. The bill also restricts issuance to regulated entities like insured banks or approved financial institutions.
Proponents believe the bill will enhance consumer safety and reduce systemic risk, especially as stablecoins gain traction in global remittance and commerce. However, critics say the bill could stifle innovation and hand control over a decentralized innovation to traditional institutions.
The latest hearing in Congress turned heated as crypto executives pressed lawmakers to include provisions allowing interest payments. Lawmakers appeared divided, with Republicans showing openness while some Democrats expressed concerns over potential banking disruptions.
Arguments Against Interest-Bearing Stablecoins
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Threat to Traditional Banks
Opponents fear that interest-bearing stablecoins could siphon deposits from banks. If users move their funds to stablecoins offering higher returns and better liquidity, banks could face liquidity crunches and struggle to lend or operate effectively. -
Financial Instability Risks
Regulators worry about runs on stablecoins during market stress. If users treat stablecoins like savings products but without insurance (like FDIC coverage), panic withdrawals could trigger massive volatility. -
Lack of Federal Oversight
While banks operate under strict federal supervision, most stablecoin issuers currently fall outside traditional regulatory frameworks. Critics argue that unless the government applies bank-like regulations, it should not allow stablecoin firms to behave like banks. -
Moral Hazard and Yield Farming Fears
Allowing interest might encourage risky investment behavior by issuers looking for higher returns. If stablecoin issuers chase aggressive yields in volatile markets to support interest payments, users might unknowingly face risks they don’t understand.
Industry Voices: What the Executives Say
Jeremy Allaire, CEO of Circle, urged lawmakers to “embrace modern financial tools that empower people.” He noted that USDC already serves millions globally and that interest payments would only enhance its utility, especially for low-income users.
Executives from Coinbase, Paxos, and Chainlink Labs echoed his sentiment. They called on lawmakers to “recognize the future of programmable money” and adjust regulatory frameworks accordingly.
Kristin Smith, executive director of the Blockchain Association, emphasized that stablecoins “already play a crucial role in payment innovation” and deserve policies that promote competitiveness and consumer benefit.
What Could Happen If Congress Approves the Request?
If Congress amends the STABLE Act to allow interest payments, the industry will likely witness a wave of product innovations. Stablecoin issuers may start offering tiered interest rates, flexible term-based deposits, or DeFi-linked returns.
Wallet providers and fintech platforms could build new features, including interest calculators, automated reinvestment options, and cross-border remittance tools with built-in yield.
Users may start viewing stablecoins as legitimate stores of value, especially in regions battling inflation or unstable currencies.
However, regulators would likely respond by introducing capital and liquidity requirements, insurance models, and stricter licensing. The industry would move closer to a hybrid model, sitting between decentralized innovation and traditional financial oversight.
What Happens If Congress Rejects the Proposal?
If lawmakers deny the request, stablecoins will remain non-interest-bearing assets, at least under U.S. law. Users may continue earning interest through DeFi platforms, though those remain unregulated and often risky.
In the long run, the U.S. might lose ground to crypto-friendly jurisdictions like Singapore, the UAE, or Switzerland—where regulators already allow more flexibility around stablecoin innovation.
Crypto firms could also relocate operations or focus product growth in foreign markets. U.S. consumers may lose access to advanced features or fall behind in financial inclusion benefits offered by programmable finance.
Final Thoughts
The request by crypto executives to allow interest payments on stablecoins marks a pivotal moment in digital finance. It pushes policymakers to confront the growing intersection of crypto and traditional banking, and to define what money should look like in the 21st century.
While the idea opens up opportunities for financial innovation, inclusion, and efficiency, it also introduces regulatory complexity and systemic risk. Congress now faces the delicate task of balancing innovation with responsibility.
The decision will not only shape the future of stablecoins—it could redefine how people across the world interact with money itself.
