- Armstrong said limiting stablecoin yields protects banks and blocks consumers from earning better returns on their money.
- He argued capital already shifts naturally, noting banks park trillions at the Fed while stablecoins hold short-term Treasuries.
- Armstrong said stablecoins are fully reserved under Genius rules, unlike banks, justifying a separate regulatory framework.
On January 20, 2025, Coinbase CEO Brian Armstrong addressed stablecoin regulation during a CNBC Television interview. Armstrong discussed a stalled stablecoin bill and bank opposition to yield-bearing stablecoins. He explained why he withdrew support, how stablecoins handle reserves, and why he opposes protectionist limits favoring banks.
Stablecoin Yields and Competition With Banks
During the interview, Brian Armstrong said the bill’s main issue involved restricting rewards on stablecoins. He stated that Americans should earn higher returns on their money. According to Armstrong, banks should compete by offering better interest rates, rather than seeking regulatory protection.
Notably, Armstrong said the restriction appeared designed to protect banks. He added that banking lobbyists pushed for the provision. However, banks argue stablecoins could trigger large withdrawals, weakening credit creation across the U.S. economy.
Armstrong acknowledged those concerns exist. Still, he said capital naturally moves toward better risk-adjusted returns. He explained that interest rate changes influence whether funds move into lending or government securities.
Capital Flows, Lending and Treasury Holdings
Armstrong said banks already hold trillions of dollars at the Federal Reserve instead of lending. Therefore, he argued that capital allocation already shifts under current conditions. He noted that stablecoins typically hold reserves in short-term U.S. Treasuries.
He explained that crypto platforms can also offer lending products. For example, Armstrong pointed to the growth of decentralized finance lending. He added that banks could also provide similar services under clear rules.
However, he stressed that markets should determine outcomes. According to Armstrong, regulation should allow competition rather than restrict specific products.
Stablecoin Reserves and Regulatory Differences
The discussion then turned to whether stablecoin issuers should face bank-style regulation. Armstrong said banks operate on fractional reserve lending. He explained that banks lend customer deposits to earn interest spreads.
By contrast, Armstrong said stablecoin issuers follow different rules. Under the Genius framework, issuers must hold full reserves. He stated that 100 percent of stablecoin backing sits in short-term U.S. Treasuries.
He described this structure as low risk. Armstrong emphasized that stablecoin reserves cannot be lent out. He said this distinction explains why stablecoins require a different regulatory approach.
