- China will allow interest to be paid on holdings of its digital yuan (e-CNY) starting in 2026.
- U.S. banks and crypto firms are clashing over how to interpret and enforce the GENIUS Act’s ban on rewards.
- A Coinbase executive warns that banning yield on stablecoins could weaken the United States’ global competitiveness.
The People’s Bank of China (PBOC) announced earlier this week that commercial banks will be permitted to pay interest on balances held in the digital yuan, commonly referred to as e-CNY.
The new framework takes effect on January 1, 2026. PBOC Vice Governor Lu Lei said this change will shift the e-CNY from a form of digital liquidity toward what he described as a “digital deposit currency,” an evolution intended to boost user adoption.
China has spent several years piloting the digital yuan across numerous cities and use cases, including retail payments and public services.
Nevertheless, adoption has progressed more slowly than policymakers initially hoped.
Analysts say allowing interest payments could make the e-CNY more competitive with traditional bank deposits and private digital payment platforms, potentially accelerating domestic use and, over time, facilitating cross-border transactions.
In the United States, the debate centers on how the GENIUS Act’s ban on interest-like rewards for stablecoins should be interpreted and enforced.
Enacted in July, the law aims to keep payment stablecoins focused on transactional use rather than as savings or investment products.
Banking groups argue that permitting stablecoins to pay yields would blur the line between bank deposits and crypto assets, potentially threatening financial stability and diverting funds away from regulated banks.
Crypto industry groups strongly disagree.
In a December 18 letter to lawmakers, the Blockchain Association and more than 125 industry participants urged Congress to resist expanding or aggressively enforcing the GENIUS Act’s ban on stablecoin rewards.
The coalition said claims that stablecoin incentives pose a systemic threat to community banks are unsupported by evidence and warned that overly strict rules could drive innovation overseas.
On the same day, the American Bankers Association sent a separate letter calling for firm enforcement of the GENIUS Act.
The ABA argued that some crypto companies are attempting to circumvent the law’s intent by offering reward structures that operate similarly to interest, risking disruption to traditional banking activities.
A Coinbase executive warns China could gain an edge over the U.S.
A senior official at Coinbase warned that U.S. lawmakers may undermine the country’s position in the future of digital finance if they prohibit interest-bearing stablecoins—while China moves to make its central bank digital currency (CBDC) more attractive by allowing interest payments.
Faryar Shirzad, Coinbase’s head of policy, said this week that limiting rewards on dollar-backed stablecoins issued in the United States could hand a competitive advantage to foreign rivals, notably China.
Shirzad’s comments come amid intensifying debates in Washington about implementing the recently passed GENIUS Act, which bars U.S. dollar payment stablecoins from directly paying interest or yields to users.
In a post on X, Shirzad argued that global competition over digital money is heating up.
He pointed to the recent shift in China’s policy as evidence that incentives matter for driving adoption of new monetary forms.
According to Shirzad, the United States risks weakening the dollar’s global role if it restricts the functionality of dollar-backed stablecoins while other jurisdictions move more aggressively.
He said the GENIUS Act was designed to ensure that U.S.-regulated, dollar-backed stablecoins become primary settlement tools in a tokenized global economy.
But he warned that mishandling the issue of rewards could advantage non-U.S. stablecoins and CBDCs at a critical moment for global financial infrastructure.