Coinbase chief executive Brian Armstrong has said traditional banks will ultimately push for interest-bearing stablecoins, arguing that market forces and customer expectations will make yield-paying digital dollars unavoidable despite regulatory resistance.
Speaking on the future of digital finance, Armstrong said banks cannot indefinitely offer zero-yield stablecoins while consumers become increasingly aware that the underlying assets generate returns. As competition intensifies between fintechs, crypto firms and legacy lenders, he believes interest-paying stablecoins will emerge as a standard product rather than a niche innovation.
Stablecoins are typically backed by cash or short-term government securities that earn interest. Today, most issuers retain that yield rather than pass it on to users. Armstrong argued that this model is increasingly misaligned with consumer expectations, particularly as inflation and higher interest rates make idle balances more costly for individuals and businesses.
According to Armstrong, banks will face pressure on two fronts. First, customers will demand fairer treatment as transparency around reserve assets improves. Second, banks themselves will seek stablecoins that can compete with money market funds and high-yield savings products without pushing deposits off their balance sheets.
His comments come amid growing debate in Washington over how stablecoins should be regulated. Proposed amendments to the GENIUS Act would limit or restrict interest-bearing features on stablecoins, a move Armstrong has criticized as short-sighted. He argues that banning yield would not eliminate demand but instead push innovation offshore or into less regulated channels.
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Armstrong also suggested that interest-paying stablecoins could strengthen the banking system rather than undermine it, if properly integrated. By offering programmable, yield-bearing digital cash, banks could lower operational costs, improve settlement efficiency, and retain customers who might otherwise migrate to crypto-native platforms.
Industry analysts note that the shift toward interest-paying stablecoins would blur the line between deposits, money market instruments and digital assets, forcing regulators to rethink long-standing distinctions in financial law. While concerns remain around financial stability and consumer protection, momentum is building for frameworks that allow yield under strict supervision.
As global payments, treasury management and cross-border settlements increasingly move on-chain, Armstrong believes the question is no longer whether stablecoins will pay interest, but which institutions will be allowed to offer them, and under what rules.
