U.S. Stablecoin Interest Ban Could Give China an Edge: Coinbase Executive

• Coinbase believes a U.S. stablecoin interest ban could give China an edge.
• China will allow interest on digital yuan starting Jan 1, boosting its appeal for users.
• GENIUS Act debate heats up as crypto firms and banks clash over implementation.

A top executive at Coinbase says the United States could lose ground in the global crypto if it bans interest or rewards on U.S. stablecoins. This warning comes as China is making its own digital currency more appealing.

The debate is happening as U.S. lawmakers discuss how to enforce the GENIUS Act. At the same time, China’s central bank has changed its approach to the digital yuan.

Why Coinbase Is Concerned

In a tweet, Coinbase’s chief policy officer, Faryar Shirzad, said the issue became more serious after China announced it may allow interest payments on its digital currency, known as the e-CNY.

He explained that countries are competing more aggressively over digital money, and rewards or incentives could strongly influence which currencies people and businesses choose. If the U.S. bans rewards on dollar-based stablecoins, users may turn to foreign stablecoins or digital currencies instead.

Coinbase believes the GENIUS Act was meant to help U.S.-regulated, dollar-backed stablecoins become the main tools for digital payments worldwide. Shirzad warned that banning rewards could hurt that goal and weaken the U.S. dollar’s role globally.

China’s Digital Yuan Will Start Paying Interest

China’s central bank has announced that starting January 1, 2026, banks will be allowed to pay interest on digital yuan balances.

This change means the digital yuan will no longer act only like digital cash. Instead, it will work more like a bank deposit that can earn interest. Chinese officials hope this will encourage more people to use it, since adoption has been slower than expected despite years of testing.

Paying interest could help the digital yuan compete with regular bank accounts and popular private payment apps. It could also make the digital yuan more attractive for international payments in countries that already work closely with China’s financial system.

Related: China To Launch Digital RMB 2.0 on Jan 1 With Smart Contract Integration

GENIUS Act Puts US Stablecoins at a Crossroads

The GENIUS Act, which became law in July, bans U.S. dollar stablecoin issuers from paying interest or rewards directly to users. Lawmakers wanted stablecoins to be used mainly for payments, not as savings or investment products.

Now, there is a debate over how strictly this ban should be enforced. Crypto companies believe enforcing it too aggressively could make U.S. stablecoins less attractive than foreign ones. Meanwhile, banking groups disagree, arguing that allowing rewards would make stablecoins too similar to bank deposits and could threaten financial stability.

Industry Groups Disagree

On December 18, the Blockchain Association and more than 125 crypto companies asked Congress not to expand or strictly enforce the ban on stablecoin rewards. They argue that there is little evidence that rewards harm community banks and warn that heavy restrictions could push crypto innovation to other countries.

That same day, the American Bankers Association sent a letter calling for strict enforcement. The group said some crypto companies are already offering reward-like programs that resemble interest payments and could draw money away from traditional banks.

With China making its digital currency more appealing and the U.S. considering tighter limits on stablecoins, how the GENIUS Act is enforced could affect the U.S. financial system.

Related: FDIC Moves to Formalize How Banks Can Issue Stablecoins Under GENIUS Act