Since Trump took office as the US President, the new US government's support for cryptocurrencies has been evident, including the US Congress promoting stablecoin legislation, aimed at providing a clear regulatory framework for stablecoins.
In this context, Coinbase CEO Brian Armstrong stated this week on the X platform that stablecoins have been validated and successful in the market, but have not yet unlocked the real benefits of on-chain interest for ordinary people and the US economy. He called for the US stablecoin bill to allow investors to earn interest from stablecoins:
Stablecoin issuers typically invest US dollar reserve assets in low-risk, short-term US Treasury bills and other products, with the interest from these investments usually retained by the issuer.
"On-chain interest" refers to stablecoins functioning as a payment tool while directly delivering the interest earned from reserve assets to stablecoin holders, essentially like an interest-bearing checking account.
Unlocking Stablecoin On-Chain Interest is a Win-Win Solution
Regarding his perspective, Armstrong explained that unlocking stablecoin on-chain interest is a win-win solution, specifically including:
1. Investor Benefits:
Investors will benefit the most from on-chain interest, as they are most harmed without such a mechanism. Armstrong noted that the average federal funds rate/market yield in 2024 was 4.75%, while the average consumer savings account yield was only 0.41% (often as low as 0.01%). With last year's inflation at around 3%, this means consumers' actual purchasing power was lost by 2.5% due to intermediaries.
The solution is clear: on-chain interest democratizes market yields, giving ordinary people a fair chance to maintain and increase wealth. Investors can now earn over 4% directly through stablecoins instead of just 0.01% from savings accounts.
2. Billions Globally Win:
Billions worldwide lose savings value due to lack of banking services or local currency volatility. They cannot access US dollars, let alone earn interest on them. Interest-bearing US dollar stablecoins can include them through an instant, transparent, and global financial system - requiring only a simple internet connection, without visiting a bank or high remittance fees. This is the equal financial opportunity provided by cryptocurrency infrastructure.
3. US Economy Wins:
Stablecoins are already one of the largest US Treasury bill holders, holding more than most countries and potentially becoming the largest in a few years. They are rapidly bringing global users into the US dollar system, pulling US dollar funds back to US Treasury bills, and continuing the dollar's dominance in an increasingly digital global economy. Higher yields in investors' hands mean more consumption, savings, and investment - injecting growth momentum into the local economies where stablecoins circulate:
If we do not unlock on-chain interest, the US will miss out on billions of potential US dollar users and trillions in potential cash flow.
Based on these reasons, Armstrong again emphasized that technology is in place, awaiting legislative approval, and the US should make this possibility a reality:
The technology is ready, but the law has not caught up. Stablecoins should be able to pay interest like ordinary savings accounts without the complex disclosure requirements and tax implications of securities laws.
We now face a huge opportunity as pro-cryptocurrency governments and Congress are actively developing new stablecoin legislation. We can choose fair competition, ensuring these laws pave the way for all regulated stablecoins to directly provide interest to investors, like savings or checking accounts.
Or we can continue protecting an outdated system where ordinary people only earn 0.01% interest while intermediaries take most of the profits.
Tether Earns $13 Billion in One Year
Evidently, the intermediaries Armstrong refers to are stablecoin issuers like Tether and Circle. Especially Tether, whose USDT stablecoin is second only to Bitcoin and Ethereum in market value.
According to Tether's 2024 Q4 financial report, the company's net profit for 2024 reached $13 billion, with $7 billion from US Treasury bills and repurchase agreement interest, and $5 billion from unrealized appreciation of gold and Bitcoin holdings, making it the biggest winner in the stablecoin field.
