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Armstrong's push for onchain interest in stablecoins makes sense from both a competitive and macroeconomic standpoint. If stablecoin issuers could pass interest directly to holders, it would create a compelling alternative to traditional bank savings accounts, which offer much lower yields.
The regulatory hurdle seems to be that both the STABLE and GENIUS Acts, as currently drafted, prevent stablecoin issuers from paying interest, treating them more like cash equivalents than investment vehicles. This keeps them in a payments-focused framework rather than a financial instrument category that could compete with bank deposits or money market funds.
Armstrong’s argument that allowing onchain interest would strengthen dollar dominance is particularly interesting. If more global users opt for USD-pegged stablecoins because they offer yield, it could increase demand for U.S. Treasuries, reinforcing the dollar's role in global finance.
It’ll be worth watching how lawmakers reconcile these competing visions. If they open the door to interest-bearing stablecoins, it could reshape how capital flows in crypto and beyond. Do you think regulators will eventually give in to this idea, or will they maintain the current restrictions?
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