After China’s latest strategic developments involving the Digital Yuan, several leaders in the cryptocurrency space have expressed concerns that the United States’ stance on banning interest payments on stablecoins could place American financial interests at a notable disadvantage.
On Tuesday, Faryar Shirzad, Chief Policy Officer at Coinbase, took to social media to caution US lawmakers about the potential dangers of prohibiting interest payments on stablecoins. He highlighted that such a ban might undermine the significant legislative progress achieved this year with the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act.
Shirzad emphasized the importance of tokenization, suggesting that the GENIUS Act represented a forward-thinking initiative by both the President and Congress aimed at ensuring that US dollar stablecoins governed by domestic regulations would become the predominant mechanism for future transactions.
However, he identified a pressing challenge: the recent announcement by the People’s Bank of China regarding its intention to pay interest on the Digital Yuan (e-CNY). Shirzad warned that this could present a more substantial issue for the US than investors might realize. According to reports, the People’s Bank of China will initiate interest payments on Digital Yuan holdings, commencing on January 1, 2026. This pivotal shift could lend significant legal status to the e-CNY, aligning it with traditional bank deposits.
Shirzad cautioned, “If this issue is mishandled in Senate negotiations surrounding the market structure bill, it could unwittingly assist our global rivals in granting non-US stablecoins and central bank digital currencies (CBDCs) a key competitive edge, particularly at such a critical juncture.”
In addition to Shirzad, other prominent figures in the crypto sector echoed similar sentiments. Brian Armstrong, Coinbase’s CEO, reiterated the necessity for US stablecoins to maintain competitiveness on a global scale. Jake Chervinsky, Chief Legal Officer at Variant, took it a step further, labeling the attempts to ban stablecoin rewards as not merely a quest for regulatory dominance by entrenched financial institutions but as a crucial issue of national security.
Chervinsky argued that revisiting the prohibition of interest payments on USD-pegged tokens could jeopardize the achievements of the GENIUS Act, inadvertently granting a strategic victory to China in the global financial arena.
The financial sector has openly criticized the US’s trailblazing stablecoin law in recent months, asserting that it contains loopholes that could jeopardize the stability of the financial system. Signed into law in July, the legislation prohibits interest payments on the holding of payment-purpose stablecoins, but this prohibition applies solely to issuers. As such, it may be easily bypassed by exchanges or affiliated entities that offer rewards.
Earlier this year, a coalition of banking associations reached out to the Senate Banking Committee, urging amendments to the law. These groups argued that interest payments could distort market dynamics and potentially disrupt credit creation, advocating for an extension of the prohibition to encompass digital asset exchanges, brokers, dealers, and associated entities.
Shirzad and other figures in the crypto industry have consistently refuted the arguments put forth by the banking sector, arguing that such proposals could stifle competition for USD-denominated tokens. In an earlier response, Shirzad condemned the narrative that stablecoins threaten traditional bank lending, asserting it fails to acknowledge the evolving landscape of finance.
As discussions about stablecoin regulations continue, the stakes remain high, not just for US interests but for the broader dynamics of global finance.
