Stablecoins in Congress: Interest Debate Sparks Legislative Tension

The cryptocurrency industry is lobbying Congress to allow stablecoin issuers to pay interest. This has sparked debate, with some lawmakers and financial watchdogs expressing concerns about potential risks to the banking system. Pending legislation in Congress could determine the future regulatory framework for stablecoins.

In a last-ditch effort, cryptocurrency leaders are urging Congress to permit interest payments on U.S. dollar-pegged tokens as part of new stablecoin regulations. The proposition has drawn mixed reactions from lawmakers and sparked warnings from financial watchdogs worried about potential impacts on the banking system.

Stablecoins, which maintain a constant value pegged to the dollar, are increasingly popular among crypto traders for transferring funds. Some executives argue for treating stablecoins like cash or bank deposits, allowing them to earn interest. However, the sector divides sharply on this issue, with diverse opinions from industry leaders and lawmakers alike.

While the House bill currently bans interest on stablecoins, the Senate's version leaves room for potential provisions. As Congress moves closer to passing the legislation, the debate over interest-bearing stablecoins continues, with proponents highlighting benefits for consumers and critics pointing to risks for traditional banks.

(With inputs from agencies.)