A senior Coinbase executive has issued a stark warning that U.S. lawmakers risk ceding a strategic advantage to global rivals, particularly China, if they restrict or ban interest payments on U.S.-issued stablecoins. Faryar Shirzad, Coinbase's Chief Policy Officer, stated in a post on X that the debate over stablecoin yield has taken on "greater urgency" following China's central bank announcement that it will allow commercial banks to pay interest on the digital yuan (e-CNY) starting January 1, 2026.
Shirzad emphasized that "tokenization is the future" and that the GENIUS Act, passed into law in July 2025, was a "visionary move" to ensure U.S. dollar stablecoins issued under U.S. rules would be the primary settlement instrument. However, he cautioned that if Senate negotiations over the market structure bill mishandle the issue of stablecoin rewards, it could give global rivals "a big assist" by granting non-U.S. stablecoins and CBDCs a meaningful competitive edge. "It's critical for negotiators to protect the primacy of the U.S. dollar and the U.S. financial system, not just incumbent interests," Shirzad added.
This warning coincides with a significant shift in China's CBDC strategy. The People's Bank of China (PBOC) announced it will permit interest on digital yuan holdings, transitioning the e-CNY from functioning as digital cash to operating as "digital deposit currency," according to PBOC Deputy Governor Lu Lei. This move is aimed at boosting adoption of the e-CNY, which has struggled to gain widespread consumer traction despite years of pilot programs.
The core of the U.S. debate revolves around the GENIUS Act, which bars issuers of U.S. dollar payment stablecoins from paying interest or yield directly to holders, intending to keep stablecoins focused on payments. Crypto industry advocates, including the Blockchain Association and over 125 industry participants, argue in a December 18 letter that limiting rewards weakens the competitiveness of U.S. stablecoins against foreign alternatives. Conversely, traditional banking groups like the American Bankers Association are urging regulators to enforce a broad prohibition, arguing that reward-like incentives could undermine traditional banking activity.
The issue is framed as a critical inflection point in the global race for digital finance supremacy, with China's centralized, state-driven approach for its CBDC contrasting with the U.S.'s private-sector-focused stablecoin regulation under proposed legislation like the CLARITY Act. Experts warn that delayed U.S. action could cede strategic ground, influence reserve currency status, and reshape international payment systems.
