Main Points：
- Legislative Consensus: Representative French Hill, Chair of the US House Financial Services Committee, stressed that payment stablecoins cannot offer interest—reflecting a broad consensus in Congress.
- Stablecoin Purpose: The law is founded on the principle that stablecoins should serve purely as payment instruments, not investment products, and thus should not be subject to interest payments like bank deposit accounts.
- Industry Opposition: Major crypto exchanges, including Coinbase, have lobbied to allow interest-bearing stablecoins, arguing that interest would benefit consumers by countering inflation and increasing financial inclusion.
- Regulatory Details: The current stablecoin bill explicitly bans interest payments on US dollar–denominated payment stablecoins; the measure is common to both House and Senate proposals such as the revised STABLE Act.
- Political Tensions: The issue is further complicated by criticisms of crypto-related activities linked to the Trump family, which some fear may undermine the legislative process.
1. Introduction: A Clear Stance on Payment Stablecoins
In a decisive move, Representative French Hill of the US House Financial Services Committee has made it clear that payment stablecoins will not be allowed to offer interest to users. During a press conference on March 31, Hill emphasized that stablecoins—designed primarily as payment instruments rather than investment products—should not provide yield as part of their function. This stance comes amid lobbying efforts from major industry players like Coinbase, which argue that enabling interest on stablecoins would help consumers hedge against inflation, enhance global financial inclusion, and boost cash flow.
Hill’s position reflects a broader legislative consensus in both chambers of Congress that stablecoins must be treated differently from traditional deposit accounts. Whereas banks benefit from securities law exemptions that allow interest payments on savings, current stablecoin laws do not offer similar provisions. Consequently, stablecoins intended for payments are legally barred from distributing interest.
2. The Debate Over Interest-Bearing Stablecoins
2.1 Industry Pleas for Interest Payments
Major crypto companies have long argued for regulatory reforms that would enable stablecoins to pay interest. Coinbase’s CEO, Brian Armstrong, has publicly stated on social media that consumers should have the ability to earn yield on their stablecoin holdings. Armstrong contends that, given the inflationary pressures eroding purchasing power, offering interest on stablecoins would provide a much-needed incentive for both retail and institutional investors. He further argues that stablecoins—like bank deposit accounts—should be allowed to generate income for users without distorting the market or favoring one industry over another.
Supporters of interest-bearing stablecoins believe that such products would not only improve cash flow for users but also enhance the overall appeal of digital assets. They maintain that if both banks and crypto companies can offer interest on their respective products, the playing field would be leveled, providing consumers with greater choice and more robust financial tools.
2.2 Hill’s Position: Payment Instruments, Not Savings Accounts
However, Representative French Hill’s stance diverges sharply from these industry pleas. At a press conference, Hill explained that the stablecoin legislation was drafted on the fundamental premise that stablecoins are designed solely as a means of payment—facilitating efficient transactions—rather than as investment vehicles or savings accounts. Hill stressed that the idea behind a payment stablecoin is to enhance the efficiency of digital payments, not to serve as a store of value that generates interest.
According to Hill, the legislative framework for stablecoins must maintain this focus. He pointed out that current laws do not provide an exemption under securities law that would allow stablecoins to pay interest as bank accounts do. Consequently, any provision allowing interest payments on payment stablecoins was not part of the legislative consensus reached in Congress. Hill firmly stated, “I’m not viewing stablecoins in the same way as bank deposit accounts,” reinforcing that the intended use of these digital assets is strictly for transactional purposes.
3. The Legislative Landscape: Stablecoin Bills in Congress
3.1 The Revised STABLE Act
In recent months, both the US House and Senate have been debating stablecoin legislation. On March 26, the House introduced a revised version of the Stablecoin Transparency and Accountability Act—commonly known as the STABLE Act—which includes a prohibition on stablecoins from paying interest. This amendment reflects a coordinated effort by lawmakers to ensure that payment stablecoins remain strictly as tools for transactions, free from the complications associated with interest-bearing financial products.
3.2 Political and Industry Ramifications
The debate over interest-bearing stablecoins has drawn significant attention from both lawmakers and industry leaders. While proponents like Brian Armstrong continue to advocate for a more flexible regulatory environment that would allow stablecoins to offer yield, lawmakers such as French Hill argue that any such provision would blur the line between a payment instrument and a savings vehicle, potentially leading to regulatory loopholes and unfair market practices.
Moreover, political tensions are evident in the discussions surrounding stablecoin legislation. Some critics have noted that crypto-related initiatives tied to former President Trump and his family’s ventures, such as the WLFI project, further complicate the legislative debate. Hill’s emphasis on the payment nature of stablecoins is seen as a counterbalance to these more speculative proposals, underscoring a desire to maintain a clear and stable regulatory framework.
4. Why the Ban on Interest Matters
4.1 Maintaining Market Integrity
By prohibiting interest payments on payment stablecoins, lawmakers aim to maintain market integrity and ensure that these assets serve their intended function. Allowing interest could encourage speculative behavior, potentially undermining the primary purpose of stablecoins—to provide a reliable, stable medium of exchange. In this sense, the ban is intended to protect consumers and prevent market distortions that might arise if stablecoins were to be treated as investment products.
4.2 Preventing Regulatory Arbitrage
Another important aspect is preventing regulatory arbitrage. Banks and other financial institutions have access to exemptions under securities laws that allow them to pay interest on savings accounts. If stablecoin providers were given similar allowances, it might create an uneven playing field where certain players benefit disproportionately. Hill’s position seeks to avoid such discrepancies by keeping payment stablecoins in a distinct regulatory category that does not include interest provisions.
4.3 Encouraging Transparency and Accountability
The prohibition on interest payments is also seen as a measure to enhance transparency and accountability in the stablecoin market. By clearly defining stablecoins as payment instruments, regulators hope to foster a more straightforward and easily monitored market environment. This could help reduce fraud, insider trading, and other illicit activities that have historically plagued less regulated segments of the crypto market.
5. A Clear Regulatory Path for Payment Stablecoins
The stance taken by Representative French Hill and other lawmakers on payment stablecoins marks a pivotal moment in the evolution of US cryptocurrency regulation. By insisting that stablecoins remain strictly as tools for digital transactions and not as savings vehicles, the current legislation aims to promote market integrity, prevent regulatory loopholes, and protect consumers.
While industry leaders like Coinbase advocate for the flexibility to offer interest on stablecoins—citing benefits such as inflation protection and financial inclusion—the prevailing legislative consensus is that such features are incompatible with the core function of payment stablecoins. As Congress continues to deliberate on stablecoin regulations, the clear message is that the future of these assets will be defined by their role as efficient, transparent payment instruments, not as interest-bearing investment products.
In the coming months, as both the House and Senate work through the details of the stablecoin bills, stakeholders will be watching closely to see how these regulations unfold. For now, the regulatory landscape is set to maintain a strict separation between traditional banking products and digital payment systems, ensuring that stablecoins remain a stable and reliable part of the financial ecosystem.
