Coinbase has raised alarms regarding a renewed push in Washington to impose restrictions on how stablecoins can reward users, cautioning that this could undermine the United States’ competitive edge in the digital payments arena. This concern comes at a time when China is advancing its own state-backed digital currency, aiming to enhance its attractiveness to global users.
Faryar Shirzad, Coinbase’s chief policy officer, articulated this viewpoint in a recent post on social media. He highlighted the importance of stablecoin rewards, particularly as the United States grapples with legislative discussions under the GENIUS Act. This legislative framework, which was implemented in July, has established new reserve requirements and compliance protocols for stablecoin issuers while prohibiting them from paying direct interest to customers. However, it does permit third-party platforms to offer rewards linked to stablecoin usage.
The situation has become increasingly pressing due to China’s announcement of a framework allowing commercial banks to pay interest on digital yuan wallets, starting January 1, 2026. Lu Lei, a deputy governor at the People’s Bank of China (PBOC), noted that this initiative aims to evolve the digital yuan from merely serving as a cash equivalent to being integrated within banks’ broader asset and liability management strategies.
Shirzad’s alarm is amplified by the fact that global competition in digital currencies is rapidly intensifying. Notably, China has made significant strides in developing its central bank digital currency (CBDC) despite implementing a ban on cryptocurrency trading and stablecoins within its borders. Their ongoing action plan outlines ambitious goals for expanding the national use of the digital yuan between 2026 and 2030, including building up the necessary support infrastructure.
Data showcases that as of November 2025, the digital yuan has processed approximately 3.48 billion transactions, amounting to about $2.34 trillion, involving 230 million personal wallets and nearly 19 million corporate wallets. Despite these metrics, adoption rates for the digital yuan have lagged behind popular private payment apps like Alipay and WeChat Pay, which collectively dominate over 90% of China’s mobile payments market. Challenges such as insufficient incentives and privacy concerns have led users to prefer established platforms, even after extensive pilot programs aimed at boosting adoption.
The introduction of interest-bearing digital yuan wallets is widely perceived as a strategic move to overcome these hurdles and attract users away from private payment solutions. This shift has already spurred significant market activity, with Chinese investors reportedly investing over $188 million in stocks related to the digital yuan following the announcement. However, this development has also led to warnings from authorities regarding potential scams aimed at exploiting the new interest feature, underlining the trust issues that still persist around the system.
In stark contrast, the U.S. has adopted a different approach towards digital currencies. Earlier this year, an executive order by President Donald Trump prohibited federal agencies from issuing or endorsing a central bank digital currency. The administration expressed concerns about risks to financial stability, individual privacy, and national sovereignty while signaling a preference for privately issued, regulated stablecoins as a model for a potential digital dollar.
As the regulatory landscape evolves, the implications for both U.S. and Chinese digital currencies may shape the future of global financial systems, highlighting the critical need for countries to navigate the balance between innovation and regulation effectively.
