Stablecoins are facing a convergent regulatory regime worldwide, requiring real asset backing, audits, and a ban on interest payments. Efforts to prevent interest payments may prove challenging, as some exchanges offer rewards resembling interest rates. Regulations in Europe may curb workarounds, but users can still plug assets into DeFi protocols for interest.

Despite regulations prohibiting stablecoin issuers from paying interest, owners can still earn interest through DeFi protocols. With U.S. and European interest rates at 3-4%, converting to DeFi for 4% APR can be profitable. Concerns arise about large money movements between stablecoins and yield accounts, but current blockchain capacity can handle it.

If stablecoin interest payment bans are effective, tokenized deposits could benefit on-chain. JPMorgan Chase’s deposit tokens offer yield, with counterparty risk. Deposit tokens present a new idea, distinct from stablecoins, that could gain traction on blockchain networks. The JPMC pilot on Ethereum restricts transfers to approved clients.

History shows the struggle over interest payments for bank deposits, with bans lasting until practical workarounds emerged. Blockchain offers potential solutions without the same limitations. Circumventing the ban on stablecoin interest payments seems possible, raising questions about the necessity of repeating history instead of allowing interest payments as banks do.

Read more at Yahoo Finance: Will Interest Payments Make Stablecoins More Interesting?