US Stablecoin Restrictions Risk Giving China an Edge, Says Coinbase Executive

A senior executive at Coinbase has cautioned that proposed limits on rewards for U.S.-issued stablecoins could weaken America’s competitive position in digital finance, particularly as China moves to allow interest payments on its central bank digital currency.

Faryar Shirzad, Coinbase’s chief policy officer, said the debate over whether stablecoin issuers should be permitted to offer yield has taken on new urgency following recent developments in China’s digital currency strategy. Writing on X, Shirzad warned that restricting incentives on U.S. dollar stablecoins could unintentionally benefit foreign digital currencies and stablecoins operating under more flexible frameworks.

His comments come as the People’s Bank of China prepares to allow commercial banks to pay interest on holdings of the digital yuan, or e-CNY, under a new policy scheduled to take effect on January 1, 2026.

China shifts its CBDC strategy

China’s central bank announced earlier this week that it will permit banks to offer interest on digital yuan balances, marking a notable shift in the design of the country’s central bank digital currency.

According to the PBOC, the e-CNY will evolve from functioning primarily as a cash substitute into a form of “digital deposit currency,” a move aimed at boosting adoption after years of limited consumer uptake.

Analysts view the change as an effort to make the digital yuan more competitive with both traditional bank deposits and privately issued digital assets by introducing financial incentives for users.

US stablecoin debate intensifies

In contrast, U.S. lawmakers have taken a more restrictive approach. The GENIUS Act, which became law in July, prohibits issuers of U.S. dollar–denominated payment stablecoins from paying interest or yield directly to holders. The measure was designed to ensure stablecoins remain focused on payments rather than functioning as investment products.

However, disagreement has emerged over how broadly the ban should be interpreted and enforced. Crypto firms argue that a rigid application could undermine the global competitiveness of U.S. stablecoins at a time when other countries are actively enhancing incentives for digital money adoption.

Shirzad said that if lawmakers mishandle the issue during ongoing negotiations over broader market structure legislation, they risk giving international rivals an unnecessary advantage. He added that debates driven by incumbent financial interests could come at the expense of long-term U.S. leadership in digital finance.

Industry and banking groups at odds

The dispute has drawn sharp responses from both sides of the financial sector. In a letter dated December 18, the Blockchain Association and more than 125 crypto industry participants urged Congress to avoid expanding restrictions on stablecoin rewards, arguing that there is little evidence such incentives pose a threat to community banks.

Banking groups have taken the opposite view. The American Bankers Association, in a separate letter released the same day, called for strict enforcement of the GENIUS Act’s ban on yield-bearing stablecoins.

The group warned that reward-like mechanisms offered by some crypto platforms could blur the line between payment tools and deposit products, potentially undermining traditional banking activity.