Coinbase Warns US “Rewards” Ban Could Let China Win the Stablecoin Race | Invesloan.com

Coinbase has warned that a renewed push in Washington to restrict how stablecoins can reward users could weaken the United States’ position in digital payments at a time when China is actively upgrading its own state-backed digital currency to make it more attractive.

Faryar Shirzad, Coinbase’s chief policy officer, raised the concern in a post on X, arguing that restrictions around rewards could reduce the appeal of dollar-backed stablecoins overseas.

He said the issue is especially sensitive as rival systems move to make their digital currencies more competitive.

Shirzad pointed directly to China’s latest moves on its central bank digital currency, the digital yuan, as an example of how fast the global environment is changing.

As China Sweetens Digital Yuan, Coinbase Questions U.S. Stablecoin Limits

Earlier this week, the People’s Bank of China unveiled a framework that will allow commercial banks to pay interest on balances held in digital yuan wallets starting January 1, 2026.

Lu Lei, a deputy governor at the PBOC, said the change would shift the e-CNY beyond its original role as a digital version of cash and integrate it into banks’ asset and liability operations.

In the United States, the discussion is unfolding against the backdrop of the GENIUS Act, signed into law in July as the country’s first comprehensive stablecoin framework.

The legislation set reserve and compliance standards for issuers and barred them from paying direct interest while still allowing platforms and third parties to offer rewards tied to stablecoin usage.

Shirzad warned that changes during Senate negotiations on a broader market structure bill could tip the balance further, potentially giving non-US stablecoins and CBDCs a competitive edge.

Industry observers say pressure to revisit the law is coming from traditional banking interests.

Crypto policy commentator Max Avery said banks, which currently earn roughly 4% on reserves held at the Federal Reserve, have little incentive to see that yield shared more widely.

Stablecoin platforms, by contrast, have argued that passing some of that return to users through rewards is part of what makes the products attractive.

China Pushes More on Digital Yuan Growth as Private Apps Still Dominate

China continues to develop its CBDC despite banning cryptocurrency trading and stablecoins domestically. Its latest action plan, covering 2026 to 2030, seeks to expand national usage of the digital yuan and build out supporting infrastructure.

By November 2025, the e-CNY had processed 3.48 billion transactions worth 16.7 trillion yuan, or about $2.34 trillion, across 230 million personal wallets and nearly 19 million corporate wallets.

The introduction of interest-bearing digital yuan wallets is widely seen as an attempt to address long-standing complaints.

Adoption has lagged behind private payment platforms such as Alipay and WeChat Pay, which together control more than 90% of China’s mobile payments market.

Users have cited a lack of incentives and ongoing privacy concerns as reasons for sticking with existing apps, despite years of pilot programs.

The policy has already triggered a surge in market activity, with Chinese investors pouring more than $188 million into digital yuan-related stocks following the announcement.

At the same time, authorities have issued warnings about scams exploiting the new interest feature, highlighting the trust issues the system still faces.

Notably, the U.S. has taken a markedly different approach. In January, President Donald Trump signed an executive order barring federal agencies from issuing or supporting a central bank digital currency.

The administration cited risks to financial stability, personal privacy, and national sovereignty while showing support for privately issued, regulated stablecoins as the preferred digital dollar model.

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