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A Coinbase executive warned that proposed restrictions on US stablecoin rewards could hand a competitive advantage to China digital yuan, which will begin paying interest on wallet balances starting Jan. 1, 2026, in a move to deepen the currency’s integration into the banking system.
Faryar Shirzad, Coinbase’s chief policy officer, said in an X post that Senate negotiations over the GENIUS Act risk weakening dollar-backed stablecoins at a critical moment as Beijing enhances the digital yuan’s appeal to users and financial institutions through interest-bearing features.
Earlier this week, the People’s Bank of China unveiled a framework allowing commercial banks to pay interest on balances held in China digital yuan wallets starting Jan. 1, 2026.
According to Lu Lei, a deputy governor at the central bank, the policy marks a shift that embeds the digital currency deeper into China’s banking system rather than treating it purely as electronic cash.
“The digital RMB will shift beyond its role as digital cash and function as a digital deposit currency within the banking system,”
Lei said, adding that the China digital yuan would now function as a store of value, a unit of account, and a tool for cross-border payments. The shift, he noted, integrates the currency into banks’ asset and liability management strengthening its institutional appeal.
Shirzad warned that restrictions on rewards tied to US issued stablecoins could be costly if lawmakers misjudge the competitive landscape. He argued that limiting incentives would come at a time when the China digital yuan is explicitly being enhanced to attract both domestic and international users.
“If Senate negotiations on the market structure bill go wrong, the outcome could significantly advantage global competitors by giving non US stablecoins and CBDCs a critical edge at a particularly sensitive moment.”
Shirzad said, referencing the growing momentum behind the China digital yuan.
The GENIUS Act, passed in June, set reserve and compliance standards for stablecoin issuers while banning direct interest payments.
However, it allows platforms or third parties to offer rewards linked to stablecoin usage. Critics argue that reopening the law could tilt the playing field just as the China digital yuan gains yield like features through interest bearing wallets.
Crypto policy commentator Max Avery echoed those concerns, saying bank lobbyists are pushing to revisit the legislation.
He noted that while banks earn roughly 4% on reserves parked at the Federal Reserve, consumers often receive little to no yield on traditional savings accounts an imbalance stablecoin platforms seek to disrupt, even as the China digital yuan evolves.
Coinbase CEO Brian Armstrong has firmly opposed efforts to amend the law, warning that any attempt to reopen the GENIUS Act would cross a “red line,” while accusing banks of lobbying Congress to curb stablecoin rewards in order to protect their deposit base warning that such moves would only accelerate interest in alternatives like the China digital yuan.
Armstrong said banks are misreading the long term opportunity, predicting they will eventually seek to offer interest and yield on stablecoins themselves once the benefits become clear.
He described the current lobbying campaign as unethical and unlikely to succeed arguing that innovation will prevail as global competition intensifies and the China digital yuan continues its expansion.
