The debate around stablecoin regulation intensified as Bitwise Chief Investment Officer Matt Hougan openly criticized proposed restrictions on stablecoin issuers’ ability to offer interest payments. Hougan argues that limiting interest yields on stablecoins would not only stifle innovation but also weaken the U.S. position in the rapidly expanding digital asset ecosystem. According to him, interest-bearing stablecoins are essential for driving real-world adoption, supporting global demand, and creating a competitive environment that encourages responsible financial innovation.
Stablecoins have grown into a multi-hundred-billion-dollar market, serving as a vital liquidity layer across crypto exchanges, decentralized finance (DeFi) protocols, and cross-border payment systems. Hougan believes that restricting stablecoin issuers from offering interest would undermine these utilities by reducing consumer incentives and pushing users toward unregulated offshore alternatives. This could increase systemic risks and allow competing jurisdictions, such as the EU or parts of Asia, to gain a technological and regulatory advantage over the U.S.
The Bitwise CIO emphasized that offering interest on stablecoins is no different from providing yield on traditional savings accounts or money market funds — both of which operate within mature regulatory frameworks. By enabling regulated stablecoin issuers to offer transparent, fully collateralized yield products, the U.S. can set a global standard for safety and innovation. Hougan argues that strong oversight combined with competitive yields would attract both retail users and institutions, expanding the stablecoin market while ensuring high consumer protections.
He also pointed out that stablecoin issuers typically invest reserves in short-term U.S. Treasuries — generating billions annually in interest. Currently, most of that revenue is kept by issuers rather than shared with users. Allowing issuers to pass on a portion of these yields to holders would increase transparency and align incentives. It would also strengthen the legitimacy of regulated issuers and reduce the appeal of riskier alternatives in the DeFi space.
Critics of interest-bearing stablecoins express concerns about financial stability, arguing that such products might resemble shadow banking. However, Hougan asserts that applying clear regulatory standards — such as full reserve backing, audited disclosures, and strict liquidity requirements — would effectively mitigate these risks. Instead of restricting innovation, lawmakers should aim to craft intelligent regulation that supports both consumer safety and economic progress.
The U.S. stablecoin debate comes at a critical moment as global adoption accelerates. Countries worldwide are exploring blockchain-based financial infrastructure, and demand for transparent, asset-backed currencies continues to rise. Hougan warns that if the U.S. adopts overly restrictive policies, it could fall behind in shaping the future of digital payments — a future increasingly influenced by programmable money, tokenized assets, and blockchain-based settlement systems.
In summary, Bitwise CIO Matt Hougan strongly opposes regulatory proposals that would ban or limit stablecoin interest payments, arguing that they would hinder U.S. innovation, drive users offshore, and weaken America’s leadership in digital finance. He calls for a balanced approach that allows regulated issuers to offer transparent, interest-bearing products while maintaining high consumer protection standards. As the stablecoin market evolves, the decisions policymakers make today will play a decisive role in shaping the competitiveness of the U.S. digital economy.
