On 31/03/2025, Chairman of the House Financial Services Committee French Hill bluntly rejected Coinbase's proposal to allow interest-bearing stablecoins. As the stablecoin STABLE Act is about to be passed, will this move slow down the crypto sector's ambitions to compete with traditional banks?
Coinbase Proposes Interest-Bearing Stablecoin: Immediately Rejected
#Stablecoin – digital assets pegged to the USD – are the backbone of the crypto market, supporting tens of billions of USD in transactions each day. At Coinbase, users can currently earn 4.1% APY (annual percentage yield) from USDC – an attractive feature that can compete with traditional bank savings accounts (which have much lower interest rates). However, stablecoin bills in the U.S. House and Senate currently prohibit interest or yield payments to holders.
On Monday (31/03), Coinbase CEO Brian Armstrong publicly called on Congress to ease these restrictions on X. He argued that if interest-bearing stablecoins are banned, the government would 'tip the scales' in favor of the banking sector, disadvantaging crypto. But just hours later, Congressman French Hill (Republican, Arkansas) – Chairman of the House Financial Services Committee – dashed Armstrong's hopes. Hill asserted to the press: 'Stablecoins are seen as a payment medium to increase efficiency, not as investment products. That is the consensus between the two chambers of Congress, nothing more complicated.'
When #Decrypt asked about Coinbase's perspective – that this law could favor banks – Hill responded: 'I do not view stablecoins like bank accounts. I understand their viewpoint, but there is no consensus between the parties or the two chambers regarding whether stablecoins pegged to USD should pay interest to holders.'
STABLE Act: The Future of Stablecoins
The House Financial Services Committee, led by Hill, will consider the STABLE Act on Wednesday (01/04). This bill could legalize stablecoins in the U.S. for the first time, but with strict conditions, including a ban on interest payments – a key selling point for issuers like Coinbase. Decrypt reached out to Coinbase to inquire about their reaction to Hill's stance, but has not yet received a response.
Aspirations of the Crypto Sector: Competing with Banks
Interest rates and yields are crucial factors for stablecoins to attract users. At the DC Blockchain Summit last week, the Trump family and business partners – who just launched a stablecoin through World Liberty Financial – promoted the product as 'the future of American banking.' Chase Herro, co-founder of World Liberty, said: 'Stablecoins provide an unlimited banking system, allowing users to hold USD with interest rates of 4%, 5%, 6% right in their accounts, and pay directly at any point of sale.'
Herro emphasized: 'We have overlooked the simplest idea: how to get consumers to use better products?' However, with Hill's stance, these benefits may not materialize, reducing the competitiveness of stablecoins against traditional banks.
Impact on the Crypto Market
USDC (~1 USD): If interest is banned, the appeal of $USDC on Coinbase (4.1% APY) will decrease, affecting capital flows.
Stablecoin market: Tether (USDT ~144 billion USD) could benefit if not affected by U.S. law (headquartered in El Salvador).
Crypto sector: $BTC and altcoins are not directly affected, but investor sentiment may be impacted (South Korea 9.8 million USD, $TRUMP supports crypto).
Conclusion: Will Stablecoins Only Be Payment Instruments?
French Hill's rejection of Coinbase's proposal shows that the U.S. Congress wants to position stablecoins as payment tools, not investment products. Even if the STABLE Act could legalize stablecoins, interest rate restrictions will reduce their appeal. Will the crypto sector find ways to overcome this barrier, or must they accept the new 'rules of the game'? As the U.S. Congress prepares to vote, the future of stablecoins is in the spotlight.
Risk warning: Crypto investments carry high risks due to price volatility and regulatory changes. Please consider carefully before participating.