TLDR
- Coinbase exec warns Senate stablecoin changes may benefit China’s digital yuan.
- China’s new digital yuan wallet policy could outpace U.S. stablecoins.
- GENIUS Act debate over rewards could hurt U.S. global stablecoin standing.
- Coinbase CEO says attempts to reopen GENIUS Act are “unethical.”
Faryar Shirzad, the Chief Policy Officer at Coinbase, raised concerns that potential changes to the U.S. stablecoin regulations could diminish the global competitiveness of U.S.-issued stablecoins. His warning follows China’s decision to expand the functionality of its central bank digital currency (CBDC), the digital yuan, allowing commercial banks to offer interest on digital yuan balances starting January 1, 2026. This move is seen as a step forward in making the digital yuan more competitive in the global financial system.
Shirzad’s comments focus on the debate surrounding the GENIUS Act, which passed earlier this year and established rules for stablecoin issuers. The Act prohibits stablecoin issuers from paying direct interest but allows third parties to offer rewards. Shirzad cautioned that further amendments to the Act could hinder the U.S. dollar stablecoins’ global standing, especially in comparison to China’s expanding digital currency ecosystem.
China’s Digital Yuan Takes a Major Step Forward
The People’s Bank of China (PBOC) recently revealed plans to enhance the digital yuan’s role in the country’s financial system. Starting in 2026, commercial banks in China will be able to offer interest on holdings in digital yuan wallets.
This change aims to transition the digital yuan from a simple digital cash alternative into a more versatile digital deposit currency with broader monetary functions. The move could significantly boost the digital yuan’s global appeal, particularly for cross-border payments and as a store of value.
Lu Lei, the Deputy Governor of the PBOC, emphasized that the digital yuan would now function in a way similar to traditional digital deposit money. This shift is seen as a strategic effort to enhance the digital yuan’s competitiveness against other global digital currencies and stablecoins.
As China strengthens its digital currency, U.S. policymakers face a crucial decision regarding how U.S. stablecoins are regulated. Shirzad argued that a failure to allow U.S. stablecoin issuers to offer rewards or interest could result in U.S. stablecoins losing ground to China’s digital yuan in international markets.
GENIUS Act Debate Could Have Major Consequences for U.S. Stablecoins
The GENIUS Act, passed in June, set reserve and compliance rules for stablecoin issuers in the U.S. while restricting them from offering direct interest. Although third-party platforms can offer rewards, the scope of what constitutes a permissible reward is still a matter of debate.
According to Shirzad, further amendments to the law could reduce the competitiveness of U.S. stablecoins at a time when other nations, such as China, are advancing their digital currency systems.
The concern is that any regulatory changes that restrict U.S. stablecoins from offering more competitive rewards or interest could result in non-U.S. stablecoins and CBDCs gaining an edge in the global market. As China moves forward with its plans for the digital yuan, the U.S. could fall behind if it limits the incentives U.S.-issued stablecoins can offer.
Banking Lobby’s Role and Coinbase’s Position
In addition to Shirzad’s warning, Coinbase CEO Brian Armstrong recently spoke out against efforts by the banking lobby to reopen the GENIUS Act. Armstrong labeled these efforts as “unethical” and argued that they aimed to protect traditional banking models, where depositors earn low interest rates. Stablecoin platforms, by offering yields and rewards, challenge the traditional banking system’s deposit model, which currently provides minimal returns to savers.
Armstrong also expressed confidence that banks would eventually see the value in offering interest on stablecoins themselves once they fully understand the market opportunity. He stressed that the push to limit rewards on stablecoins was misguided and would ultimately fail.
Get 3 Free Stock Ebooks
Discover top-performing stocks in AI, Crypto, and Technology with expert analysis.
- Top 10 AI Stocks - Leading AI companies
- Top 10 Crypto Stocks - Blockchain leaders
- Top 10 Tech Stocks - Tech giants
