Congressional Skepticism Blocks Coinbase's Bid for Yield-Generating Stablecoins

Top Lawmaker Shuts Down Coinbase's Plea to Recognize Interest-Bearing Stablecoins

A top US lawmaker has rejected Coinbase's plea to recognize interest-bearing stablecoins as a legitimate form of digital currency, dealing a significant blow to the cryptocurrency exchange's efforts to expand its product offerings.

In a letter to Coinbase, Senator Elizabeth Warren (D-MA) expressed concerns that interest-bearing stablecoins, which allow users to earn interest on their holdings, could be used to evade consumer protection laws and exacerbate financial inequality.

Warren, a vocal critic of cryptocurrencies, cited concerns that interest-bearing stablecoins could be used to circumvent consumer protection laws, such as the Truth in Lending Act, which requires lenders to disclose interest rates and other terms to borrowers.

"Coinbase's proposal to offer interest-bearing stablecoins could create a new avenue for consumers to be taken advantage of," Warren wrote. "I urge you to reconsider this proposal and instead focus on developing products that prioritize consumer protection and financial stability."

Coinbase had argued that interest-bearing stablecoins could provide a safer and more attractive alternative to traditional savings accounts, allowing users to earn a return on their holdings without exposing themselves to the volatility of other cryptocurrencies.

The company had also pointed out that interest-bearing stablecoins are already widely available on other cryptocurrency exchanges, and that rejecting them would put Coinbase at a competitive disadvantage.

However, Warren's rejection of Coinbase's proposal is likely to be seen as a significant setback for the company, which has been seeking to expand its product offerings and attract a broader range of users.

The decision is also likely to have implications for the broader cryptocurrency market, which has been struggling to gain mainstream acceptance in the face of regulatory uncertainty and market volatility.