After China’s latest move with its Digital Yuan, multiple crypto industry executives have cautioned that the US banks’ push to prohibit all interest payments on stablecoins could give a major advantage to their global rivals.
US Risks Giving China A Major Global Advantage
On Tuesday, Coinbase’s Chief Policy Officer (CPO), Faryar Shirzad, warned the US Congress that banning interest payments on the digital assets could risk diminishing the legislative efforts and victories obtained this year with the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act.
In an X post, Shirzad affirmed that “tokenization is the future and the GENIUS Act was a visionary move by POTUS and Congress to ensure US dollar stablecoins issued under US rules would be the primary settlement instrument of the future.”
However, Shirzad noted that the “sobering and timely” announcement by the People’s Bank of China of its plan to pay interest on the Digital Yuan could pose a bigger problem to the US than investors think.
As reported by Bitcoinist, China is about to start paying interest on its Digital Yuan (e-CNY). Deputy Governor at the People’s Bank of China, Lu Lei, recently shared a new framework that will redefine the rules of virtual currency, giving it the same legal status as deposits held at banks.
Under the new framework, commercial banks that manage Digital Yuan wallets will be able to pay interest to clients based on the amount of e-CNY they hold, starting from January 1, 2026.
Based on this, Shirzad cautioned that “If this issue is mishandled in Senate negotiations on the market structure bill, it could hand our global rivals a big assist in giving non-US stablecoins and CBDCs a critical competitive advantage at the worst possible time.”
Stablecoin Rewards: A ‘Matter Of National Security’
Coinbase’s CPO added that although “lobbyists for entrenched incumbents will always fight change,” it’s crucial for Congress to “protect the primacy of the US dollar and the US financial system, “not just incumbent interests.”
Similarly, other crypto executives agreed with Shirzad’s statement, including Coinbase’s Chief Executive Officer (CEO) Brian Armstrong and Variant’s Chief Legal Officer (CLO) Jake Chervinsky.
Armstrong emphasized that US “stablecoins must remain competitive on a global stage. Meanwhile, Chervinsky asserted that banks’ push to ban stablecoin rewards “isn’t just a matter of incumbents seeking a regulatory moat. It’s a matter of national security.”
To the lawyer, revisiting the issue of interest payments on USD-pegged tokens would weaken the victory that the GENIUS Act gave to US dollar dominance worldwide and “hand that win to China.”
Notably, the banking sector has criticized the US’s landmark stablecoin legislation over the past few months, arguing that it has loopholes that could pose risks to the financial system.
The crypto framework, which was signed into law by President Trump in July, prohibits interest payments on the holding or use of payment-purpose stablecoins. Nonetheless, the prohibition only addresses issuers, meaning that it could be “easily circumvented” by exchanges or affiliates providing rewards.
Earlier this year, multiple banking associations across the US sent a joint letter to the Senate Banking Committee urging Congress to amend the law. The banking groups claimed that interest payments would distort market dynamics and could affect credit creation. Therefore, they suggested extending the prohibition to include digital asset exchanges, brokers, dealers, and related entities.
Shirzad, alongside multiple crypto industry players, has rejected these concerns over the past several months, stating that the banking sector’s proposals could threaten to create an uncompetitive environment for USD-denominated tokens.
In October, Coinbase’s CPO slammed the financial institution’s narrative that stablecoins would destroy bank lending, concluding that it “ignores reality” and misreads the crucial moment.
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