A senior Coinbase executive is warning that proposed changes to US stablecoin rules could weaken Washington’s competitive position in digital finance, just as China moves to make its state-backed digital currency more attractive.
In a post on X, Coinbase chief policy officer Faryar Shirzad said ongoing Senate negotiations around the GENIUS Act risk undermining US dollar–denominated stablecoins if lawmakers restrict how platforms can offer rewards to users.
The concern, he argued, is not theoretical. China is actively upgrading its digital yuan in ways that could make it more appealing in both domestic and cross-border payments.
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. 🇨🇳🇨🇳
— Faryar Shirzad 🛡️ (@faryarshirzad) December 30, 2025
Tokenization is the future and… pic.twitter.com/stg8ffKzT7
Debate over stablecoin rewards heats up as China upgrades the digital yuan
Earlier this week, the People’s Bank of China outlined a new framework allowing commercial banks to pay interest on balances held in digital yuan wallets starting Jan. 1, 2026.
Deputy governor Lu Lei said the move would shift the e-CNY beyond its original role as a digital cash substitute and integrate it directly into banks’ balance sheets and funding operations.
“The digital RMB will move from the digital cash era to the digital deposit currency era,” Lei said, describing a system that supports value storage, settlement, and cross-border use.
Stablecoin rewards emerge as a flashpoint
The GENIUS Act, passed in June, set reserve, disclosure, and compliance standards for stablecoin issuers while banning direct interest payments from issuers themselves. It does, however, allow platforms and third parties to offer rewards tied to stablecoin usage, a distinction that has become central to the current debate.
Shirzad warned that narrowing or removing that flexibility during Senate negotiations on broader market structure legislation could leave US stablecoins at a disadvantage relative to foreign alternatives and state-backed digital currencies.
“If this issue is mishandled,” he said, “it could give non-US stablecoins and CBDCs a meaningful competitive advantage at a critical moment.”
Industry commentators say pressure to revisit the law is coming from traditional banks. Crypto policy analyst Max Avery noted that banks are incentivized to preserve a system in which they earn interest on reserves held at the Federal Reserve while paying minimal yields to depositors.
Stablecoins that pass through rewards to users threaten that spread.
Coinbase draws a line in the sand
Coinbase CEO Brian Armstrong has taken a harder stance, calling any attempt to reopen the GENIUS Act a “red line.” In recent comments, he accused banking interests of lobbying Congress to restrict stablecoin rewards in order to protect their deposit base.
Armstrong argued the strategy is shortsighted. In his view, banks will ultimately seek to offer yield-bearing stablecoins themselves once regulatory clarity improves and competitive pressure mounts. Attempts to block rewards now, he said, would only delay an outcome that market forces are likely to impose anyway.
As global competition over digital payments intensifies, the dispute highlights a broader tension in US policy: whether stablecoins are treated as a threat to legacy banking or as a strategic tool to extend the dollar’s reach in a rapidly digitizing financial system.
Oleksii Shumak
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