Coinbase Chief Policy Officer Faryar Shirzad has cautioned that a U.S. move to restrict interest payments on stablecoins could unintentionally strengthen China’s position in the global digital asset race.
Why Stablecoin Yields Matter
At the center of the warning is competitiveness. U.S.-based stablecoins currently attract users by offering yields comparable to short-term cash equivalents, often in the 4–5% range. Limiting or banning these rewards would, according to the argument, make American-issued stablecoins less appealing to global users and developers.
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. 🇨🇳🇨🇳
Tokenization is the future and… pic.twitter.com/stg8ffKzT7
— Faryar Shirzad 🛡️ (@faryarshirzad) December 30, 2025
That shift wouldn’t just hurt crypto firms. It could slow innovation across payments, savings, and onchain finance, areas where stablecoins have become core infrastructure rather than speculative instruments.
How China Could Benefit
The concern extends beyond market share. China has long viewed the global spread of U.S. dollar–linked stablecoins as a challenge to its own currency ambitions. If U.S. regulation weakens the appeal of dollar stablecoins, Chinese-linked entities could step in with alternatives, either yuan-backed products or dollar stablecoins issued from more permissive jurisdictions, including Hong Kong.
From this perspective, restrictive U.S. rules risk creating a vacuum that rivals are well-positioned to fill.
Regulatory Pressure at Home
The debate is unfolding amid lobbying from U.S. banking groups pushing to classify stablecoin rewards as illegal interest under the GENIUS Act. While the current text focuses on interest paid directly by issuers, critics argue that an overly broad interpretation could still curb yield-bearing stablecoin models.
Traditional banks, which rely on low-cost deposits, see these products as direct competition. Crypto firms, by contrast, frame them as modern financial tools that pass through returns already generated by underlying assets.
A National Security Framing
Shirzad has previously cast the issue in national security terms, arguing that maintaining leadership in digital finance is part of broader technological competition with China. In his view, stifling domestic crypto innovation doesn’t reduce risk—it simply shifts influence offshore.
The dispute underscores a growing fault line in U.S. financial policy: whether to prioritize legacy banking protections or embrace new, software-driven financial models in a world where capital and technology move globally.
