Coinbase’s chief policy officer warned that newly enacted U.S. stablecoin rules could weaken dollar-backed tokens and give China a strategic advantage. The concern focuses on the GENIUS Act’s ban on issuer-paid interest and China’s move to allow interest on digital yuan holdings starting January 1, 2026.
Faryar Shirzad raised the issue as the Senate considers follow-on market-structure legislation, arguing that mishandling the topic could benefit U.S. rivals. He linked the competitive risk directly to how lawmakers interpret the GENIUS Act’s restriction on issuer-paid interest versus permissible third-party rewards tied to stablecoin usage.
For those who misunderstand what’s at stake in the debate on offering rewards on US-issued stablecoins under the GENIUS Act, a sobering and timely announcement from the People’s Bank of China that they plan to pay interest on the Digital Yuan. 🇨🇳🇨🇳
Tokenization is the future and… pic.twitter.com/stg8ffKzT7
— Faryar Shirzad 🛡️ (@faryarshirzad) December 30, 2025
Why China’s Yield Shift Matters
Starting January 1, 2026, commercial banks in China will be allowed to pay interest on e-CNY balances, a change regulators described as a shift toward a “digital deposit currency.” By allowing yield on e-CNY holdings, China creates an explicit advantage over U.S. dollar-backed stablecoins that cannot pay issuer interest.
In the U.S., banks and financial groups favor a strict reading of the GENIUS Act’s interest ban, warning that expansive reward structures could drain deposits and disrupt traditional lending channels. Their position is that broad rewards could disintermediate core banking functions and introduce financial-stability risk.
Crypto platforms and exchanges counter that tighter limits on rewards would constrain product design and reduce the global competitiveness of dollar-pegged stablecoins. Coinbase and other industry voices argue that restricting incentives could weaken innovation and harm the international position of dollar-linked digital tokens.
Policy Trade-offs and What to Watch
Coinbase frames the divergence as a national-security and competitiveness issue, warning that reduced stablecoin functionality could erode the dollar’s appeal in digital payments and savings. The company cautions that capital and transaction flows could rotate toward non-U.S. stablecoins and interest-bearing CBDCs, reshaping liquidity and custody dynamics.
The dispute sharpens a core policy trade-off between financial-stability safeguards and international competitiveness.
