Coinbase: China’s Digital Yuan Threatens US Stablecoin Supremacy

The Digital Dollar Dilemma: Coinbase Warns US Stablecoin Dominance at Risk Amid China’s CBDC Advances

A senior executive at Coinbase has issued a stark warning: proposed amendments to the GENIUS Act could significantly undermine the global standing of US dollar-backed stablecoins. This caution comes at a critical juncture, as China actively bolsters its digital yuan (e-CNY) by introducing interest-bearing functionalities, potentially ceding Washington’s leadership in the burgeoning global digital payments arena.

Faryar Shirzad, Coinbase’s Chief Policy Officer, highlighted the gravity of the situation, suggesting that ongoing debates surrounding the ability of US-issued stablecoins to offer “rewards” under the GENIUS Act could severely impair their international competitiveness. He pointed to a recent declaration from the People’s Bank of China (PBOC) as evidence that other major economies are rapidly innovating to enhance the appeal of their state-backed digital currencies.

For those who misunderstand what’s at stake in the debate on offering rewards on US-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. 🇨🇳🇨🇳

Tokenization is the future and… pic.twitter.com/stg8ffKzT7

— Faryar Shirzad 🛡️ (@faryarshirzad) December 30, 2025

The GENIUS Act, enacted by President Trump in 2025, established federal reserve and compliance benchmarks for payment stablecoins. While it prohibits issuers from directly paying interest, it permits platforms and third parties to provide incentives or “rewards.”

Shirzad’s warning, disseminated via X, specifically referenced the PBOC’s groundbreaking decision to permit commercial banks to pay interest on digital yuan (e-CNY) balances starting January 1, 2026. This pivotal shift redefines the e-CNY, transforming it from a mere cash equivalent into a “digital deposit currency.” Lu Lei, Deputy Governor of the PBOC, underscored that this evolution significantly enhances the digital yuan’s functionality as a store of value and its capabilities for cross-border payments, formally integrating it into banks’ balance sheets.

Shirzad unequivocally stated: “If this issue is mishandled in Senate negotiations on the market structure bill, it could give a huge assist to our global competitors.”

This concern is amplified by ongoing reports of banking lobbyists actively advocating for amendments to the GENIUS Act. Their purported goal: to restrict stablecoin rewards, thereby safeguarding traditional bank deposits from competitive pressure.

“Unethical” Lobbying and the Fight for Deposits

Echoing Shirzad’s sentiments, Coinbase CEO Brian Armstrong labeled any attempt to revisit the GENIUS Act as a “red line.” He vehemently accused the banking sector of “unethical” lobbying efforts aimed at curbing stablecoin rewards solely to protect their existing deposit bases. Armstrong highlighted a significant disparity: while banks accrue yield on reserves held at the Federal Reserve (approximately 3.65% as of late December), consumers typically earn negligible returns on their savings accounts. He argued that stablecoins offering competitive rewards, such as USDC, directly challenge this established dynamic and predicted that banks would eventually be compelled to offer similar yields.

Cryptocurrency policy commentator Max Avery further corroborated these anxieties, noting the banking industry’s apparent drive to “reopen” the GENIUS Act to stifle stablecoin incentives.

This high-stakes debate unfolds amidst a period of rapid global growth for stablecoins, with the combined market capitalization of assets like Tether (USDT) and Circle’s USDC now exceeding an impressive $200 billion. Concurrently, China’s digital yuan, despite processing trillions of dollars in transactions since its 2020 pilot, has encountered hurdles in achieving widespread adoption. The newly introduced interest-bearing feature is strategically designed to boost its attractiveness compared to dominant platforms like Alipay and WeChat Pay.

Industry observers caution that regulatory missteps in the US could inadvertently accelerate the internationalization of the Renminbi (RMB), particularly as China expands its cross-border digital currency trials with key partners such as Singapore and Saudi Arabia. As Senate negotiations on the market structure bill advance, Coinbase’s firm stance underscores the escalating tension between financial innovation and entrenched traditional banking interests, with profound potential implications for the US dollar’s enduring status as the world’s primary reserve currency in the digital age.