The global race for the future of money has entered a critical new phase, and according to Coinbase, the United States may be stumbling right out of the gate. In a stark warning issued this week, Faryar Shirzad, the company’s Chief Policy Officer, cautioned that the U.S. risks ceding ground to China if lawmakers continue to enforce a ban on interest-bearing stablecoins. The ongoing discussion regarding the GENIUS Act related to U.S. Stablecoins is of great interest. In July 2025, President Trump signed into law GENIUS, as groundbreaking legislation created to bring legitimacy to the US dollar-based digital currency space. Yet the act contains a provision that has sparked a considerable amount of controversy in that it prohibits the paying of interest by issuers to their users. Shirzad argues that this prohibition is misguided especially in light of the upcoming launch of a new enhanced version of the People’s Bank of China’s digital currency.
The Coinbase Warning
Shirzad’s comments, posted to X (formerly Twitter) on December 30, 2025, were triggered by reports that Beijing is shifting tactics to boost adoption of its central bank digital currency (CBDC).
“For those who misunderstand what’s at stake in the debate on offering rewards on U.S.-issued stablecoins… a sobering and timely announcement from the People’s Bank of China that they plan to pay interest on the Digital Yuan,” Shirzad wrote.
He explained that as digital finance matures, users—both individuals and businesses—will naturally gravitate toward currencies that offer utility and yield. If U.S. stablecoins are legally barred from offering rewards while the digital yuan offers a state-backed return, the dollar’s dominance in the digital economy could erode.
China’s Strategic Pivot
The warning comes just days before a major policy shift in China. Beginning January 1, 2026, commercial banks in China will be allowed to start paying interest on e-CNY (digital yuan) wallet balances. This development is a significant transition from how the e-CNY was previously treated as simply “digital cash” (M0) and did not earn any interest for users. Moving forward, e-CNY will function similar to how a conventional savings account provides for the accumulation of interest. Officials in China are hopeful that this change will provide greater incentive for widespread usage of e-CNY, which has stalled despite years of testing and expansion. By allowing the banking industry to provide yield on e-CNY, Beijing further establishes e-CNY as a preferred medium for both national savings as well as cross-border settlement of trade.
The GENIUS Act Dilemma
In America, the GENIUS Act has created considerable confusion within the cryptocurrency sector. This was a law that both political parties voted for when it passed in 2017. The goal of the legislation was to develop a safe and regulated framework for stable coin usage to be integrated into the worldwide payments system. One of the things that both sides agreed upon in order to get the backing of traditional bank lobbyists was to include language preventing stable coin issuers from paying interest on their products. Lawmakers felt this was necessary to reinforce the idea that the sole purpose of stable coins is to facilitate payments and that they should not be positioned as an alternative form of investment that competes with bank deposits. The crypto community is pushing back against this requirement as they await the release of definitive guidelines from the government regulating stable coins. They argue that the ban was shortsighted and that “rewards”—which differ technically from bank interest—should be permissible to keep U.S. products competitive globally.
A Clash of Industries
The issue has ignited a fierce lobbying battle on Capitol Hill. In a letter sent to Congress on December 18, the Blockchain Association (comprised of more than 125 crypto companies) called for Congress’ leniency regarding stable coin yield enforcement. They assert that there is currently no evidence that stable coins that offer yield to customers harm community banks, and they further warn that should strict enforcement occur, innovation in this area will only be pushed offshore to jurisdictions that have more favorable enforcement conditions.
In opposition to this position, the American Bankers Association (ABA) sent its own letter on the same day calling for strict enforcement of the prohibition against these types of stablecoins. The ABA believes that any stable coin that offers yield should be considered as a substitute for bank deposits and that allowing unregulated technology companies to compete with banks by offering yield introduces an unacceptable risk to consumer protection and financial stability.
As 2026 approaches, the stakes are raised beyond simple compliance with regulations. With China currently using yield as part of its strategy for promoting its own currency, the question that U.S. policymakers are faced with today extends beyond concerns of financial stability and continues to address the need to maintain the dollar’s role as the reserve currency of the internet.
