Stablecoin interest ban puts U.S. at disadvantage against China

Coinbase’s Chief Policy Officer, Faryar Shirzad, warned U.S. lawmakers that they risked handing China a major advantage if they limited rewards on U.S.-issued stablecoins. The CPO emphasized China’s recent push to pay interest on its central bank digital currency (CBDC), the digital yuan, to increase stablecoin adoption in the country.

The senior Coinbase executive emphasized the significance of China’s recent initiative to incentivize stablecoin holders, suggesting that the global digital currency landscape is becoming increasingly competitive. He noted that the GENIUS Act is a visionary initiative by the Trump administration to ensure that U.S.-issued stablecoins are the primary settlement instrument in the future. 

According to Shirzad, tokenization is the future. The Senate debate over this bill should approach the issue of stablecoin rewards with caution. 

To those who may misunderstand what is at stake, Shirzad explained that mishandling the issue of interest on stablecoins could give global rivals a significant advantage by providing non-U.S.-pegged stablecoins and CBDCs with a massive competitive edge. He also emphasized the importance of preserving the primacy of the U.S. dollar and the U.S. financial system over the interests of incumbent powers.  

China’s commercial banks to introduce e-CNY interest in 2026 

The People’s Bank of China unveiled plans earlier this week to allow local commercial banks to pay interest on clients’ e-CNY holdings under a framework expected to take effect starting January 1, 2026. Lu Lei, a deputy governor of the PBOC, added that the e-CNY will transition from just a mere digital currency to functioning as a digital deposit currency. However, she pointed out that e-CNY adoption has remained a challenge since the official pilot kicked off in 2019. She emphasized that the overhaul follows ten years of experimenting with pilot programs.  

“After repeated demonstrations and open pilots, a preliminary ecosystem for the digital yuan has been established, forging a development path for digital currency with Chinese characteristics, led by the central bank.” 

–Lu Lei, Deputy Governor at the POBC

Lei further noted that cross-border and domestic trials, as well as the promotion of the digital yuan (e-CNY), have been well received by the general public. She touted China’s capabilities in pioneering a universal hybrid currency, featuring both blockchain-based and account-based models. 

Digital yuan processes over 3B transactions by end of November

According to PBOC’s Lei, the digital yuan had processed nearly 3.48 billion transactions as of the end of November. The upgrade to a digital deposit currency is expected to create more incentives for banks and their clients to use the e-CNY.  

Meanwhile, the new digital yuan will also feature more innovative technologies than the traditional monetary system. It is expected to increase tokenization across all stages of issuance, circulation, and payment processes. Lei emphasized that the digital yuan of the future will serve as a reliable measure and store of value, as well as a means for cross-border payments. 

Lei also noted that the multilateral central bank digital currency bridge (mBridge) has processed over 4,047 cross-border payment transactions. The cumulative transaction amount is approximately $55.34 billion (approximately RMB 387.2 billion). Digital currencies accounted for nearly 95.3% of the transactions across all currencies.

However, Lei said it is crucial to address risks posed by the development of digital money properly. She pointed out that balancing digital money as a central bank liability with the responsibilities of commercial banks is pretty tricky and should be properly addressed. She also noted that the relationship between responsibilities and rights regarding circulating fiat currency and digital money is becoming increasingly different.    

Moreover, Lei also believes it is critical to strike a balance between the centralized management of commercial banks and the decentralized nature of blockchain DTL (distributed ledger technology). She emphasizes the importance of guaranteeing customer rights and complying with regulatory requirements.

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