I've been thinking about this quite a bit since
@brian_armstrong wrote it, and didn't want to shoot from the hip (or on April Fools, because this is not my first time on the internet). But I've gathered a few thoughts and want to share them.
1 - I understand why both banks and issuers would like interest to be prohibited for stablecoins. For banks, they see this as eliminating one source of competition. For issuers, well, keep the money! However, there is one group who we didn't mention there, which is consumers.
2 - For the consumer, part of why banks post-2008 have been such a nightmare is that you don't get paid any interest on the checking accounts you have, so if things go well, the bank executives make a ton of money, and if things don't go well, the public bails them out! That's... not a fair arrangement!
3 - For a stablecoin, the assets are much safer but the business model is pretty simple. Again, why isn't the consumer able to get paid yield and we have a competitive market?
4 - All of this is profoundly anti-competitive in the end. It serves as a subsidy for either banks or stablecoin issuers at the expense of competition and the economic returns to the consumer.
5 - This ban on interest will greatly inhibit adoption, which is a point I think is understated (and why the banks likely enjoy the ban). After all, if I have a stablecoin that pays interest less a small fee for management, everyone can take that and hold that and get paid a fair amount. It becomes the "neutral" option for money if only backed with something like t-bills. Interoperable, generally acceptable, cheap to create. Essentially like the Vanguard low fee index fund concept, but for your deposits. You can see why they want to cripple that for companies and not pay interest - otherwise, people might actually use it!
6 - The people most hurt by this will be the non-rich and small businesses. They are the ones currently getting scalped the most by our financial monopoly, and the ban on interest is just a vote to continue expropriating them.
So, after turning this over a few times in my head, I find it hard to construct a non-protectionist argument for why we would want to ban paying interest.
And from a US perspective: another jurisdiction will allow this, so if we don't, we're just going to lose business abroad.
Thus, I think Brian is right. It's a bad idea. It's pro-monopoly and anti-consumer. It's also just silly, in the end.
Let the market sort it out, so long as the rules around reserves and bankruptcy remoteness are correct (that's where the rubber meets the road on safety).