One of Coinbase’s (NASDAQ: COIN) top executives has warned of competitive risk to the United States if dollar-backed stablecoins are prevented from offering “rewards” to users, after the People’s Bank of China (PBoC) said it plans to allow banks to pay interest on digital yuan wallets from January 2026.
Faryar Shirzad, Chief Policy Officer at Coinbase, the largest U.S.-based digital asset exchange, by trading volume, recently posted a warning on X that the debate over whether U.S. dollar stablecoins should be allowed to offer interest, in the form of “rewards,” could hurt U.S. competitiveness if handled incorrectly.
“For those who misunderstand what’s at stake in the debate on offering rewards on U.S.-issued stablecoins under the GENIUS Act, a sobering and timely announcement from the People’s BanK of China that they plan to pay interest on the Digital Yuan,” said Shirzad, pointing to a recent announcement from the PBoC.
Specifically, he was referring to the December 29 announcement by Lu Lei, deputy governor of the PBoC, that commercial banks in the country would begin paying interest on digital yuan wallets, starting January 1, 2026.
The digital yuan “will transition from the era of digital cash to the era of digital deposit money,” said Lu, adding that it has “the functions of a measure of monetary value, store of value, and cross-border payment.”
This marked a major update to the digital yuan framework and a notable push from China to promote its central bank digital currency (CBDC), a move that appears to be inspired, at least in part, by a strong year globally for stablecoins, particularly the U.S.-dollar-denominated variety.
It also follows the September launch by the PBoC of its digital yuan ‘International Operation Center’ in Shanghai, which introduced a ‘Cross-Border Digital Payment Platform’ in the hopes of boosting the CBDC’s global reach.
In contrast to China, the U.S. is staunchly anti-CBDC, with the prevailing take being that it could be misused as a tool of state surveillance and oppression—critics often point to China’s digital yuan as an example of this. One of Trump’s first acts as president, when he took office for a second time in January 2025, was to sign an executive order banning CBDCs in the U.S.
In keeping with its free-market-above-all foundational principle, the U.S. has instead thrown its weight behind private-sector U.S. dollar-issued stablecoins, and in June, Trump signed into law the long-worked on ‘GENIUS Act’, to provide regulatory certainty and support for the domestic U.S. stablecoin sector.
The bill established reserve and compliance rules for stablecoins while prohibiting issuers from paying direct interest. However, in this latter regard it did leave some leeway by allowing platforms and third parties to offer ‘rewards’ linked to stablecoin use.
The current debate among lawmakers and market participants—which is being hashed out as Congress continues to debate much-anticipated and much-delayed digital asset market structure legislation—revolves around how strictly the ban on direct interest should be enforced when it comes to these rewards.
In a December 18 letter to the U.S. Senate, the American Bankers Association called on lawmakers to strictly enforce the GENIUS Act’s ban on yield-bearing stablecoins, arguing that “requiring banks to increase deposit rates to compete with those offered by exchanges will make credit more expensive, directly affecting the economy”; while, in letter sent the same day, the Blockchain Association and over 125 crypto industry participants urged Congress to not bend to pressure to expand the GENIUS Act’s prohibition on interest or yield, arguing that “efforts to restrict lawful rewards now would reduce market competition, entrench incumbent payment providers, and destabilize a framework that was just enacted.”
Coinbase’s Shirzad framed this argument in terms of its global stakes, saying that “if this issue is mishandled in Senate negotiations on the market structure bill it could hand our global rivals a big assist in giving non-U.S. stablecoins and CBDCs a critical competitive advantage at the worst possible time.”
He added that “lobbyists for entrenched incumbents will always fight change. It’s critical for negotiators to protect the primacy of the U.S. dollar and the U.S. financial system, not just incumbent interests.”
Watch | Spotlight On: Centi Franc—the truly stable stablecoin
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Source: https://coingeek.com/coinbase-exec-us-could-fall-behind-without-stablecoin-rewards/
