A senior Coinbase executive is cautioning that the U.S. Senate risks handing a significant advantage to China in the global financial arena if it mishandles stablecoin regulation. Faryar Shirzad, Coinbase's chief policy officer, expressed his concerns in a post on X (formerly Twitter), highlighting the urgency of the debate surrounding yield-bearing stablecoins in the U.S., particularly in light of China's recent move to allow interest payments on its central bank digital currency (CBDC), the digital yuan.
The core of the issue lies in whether U.S. dollar stablecoins should be permitted to offer yield. The GENIUS Act, signed into law in July 2025, established a regulatory framework for stablecoins in the U.S. but currently bars issuers of dollar-pegged stablecoins from directly paying interest to holders. The intention behind this restriction is to maintain the focus of stablecoins on their primary function as a means of payment. However, this has led to a debate on how strictly this ban should be enforced.
Shirzad argues that limiting rewards on U.S. stablecoins could weaken their competitive standing against foreign alternatives, including CBDCs. He emphasized that "tokenization is the future" and praised the GENIUS Act as a visionary step toward ensuring that U.S. dollar stablecoins become the primary settlement instrument of the future. He warned that if Senate negotiations surrounding the market structure bill do not address the issue of stablecoin rewards effectively, it could inadvertently benefit global rivals by giving non-U.S. stablecoins and CBDCs a crucial competitive edge.
China's recent decision to allow commercial banks to pay interest on digital yuan holdings, effective January 1, 2026, is a strategic move to boost adoption of the e-CNY. This shift transforms the e-CNY from functioning as digital cash to operating as "digital deposit currency," according to the People's Bank of China (PBOC). This feature creates strategic advantages for the digital yuan, potentially reshaping global financial competition.
The GENIUS Act allows foreign issuers of stablecoins to issue stablecoins to U.S. persons and have their stablecoins listed on U.S. exchanges if they meet certain criteria. These include being subject to a regulatory regime comparable to that established by the Act, registering with the Office of the Comptroller of the Currency (OCC), and maintaining sufficient reserves in U.S. financial institutions to meet the demands of U.S. stablecoin holders.
Coinbase's warning underscores the broader concerns about the U.S. potentially falling behind in the digital finance race. As other countries, like China, actively develop and promote their own digital currencies, the U.S. faces the challenge of creating a regulatory environment that fosters innovation while also protecting consumers and maintaining the stability of the financial system. The outcome of the Senate negotiations on stablecoin rewards will be crucial in determining whether the U.S. can maintain its leadership in the evolving landscape of digital finance.
