Coinbase Executive Warns Over Stablecoin Yield Restrictions as China Advances Digital Yuan

Faryar Shirzad, chief policy officer at Coinbase, has highlighted potential risks in U.S. stablecoin regulation amid evolving global competition. In a detailed post, he responded to China's announcement that commercial banks will soon pay interest on digital yuan holdings. Shirzad argued that limiting rewards on U.S.-issued stablecoins could unintentionally strengthen the position of foreign digital currencies.

The GENIUS Act, signed into law in July, created a regulatory framework designed to support U.S. dollar stablecoins as key tools for future financial transactions. Shirzad praised the legislation for its forward-thinking approach to ensuring these stablecoins remain central to settlement processes. He emphasized that tokenization of assets on blockchain networks represents a major shift in how value is transferred and managed worldwide.

Stablecoins backed by the U.S. dollar have become essential in crypto markets for providing reliability during price fluctuations. They enable seamless movements of value across borders and support growing applications in decentralized finance. As adoption increases, features that enhance their utility could play a decisive role in maintaining their widespread use.

Shirzad noted in his post that Senate discussions on related market structure bills are addressing whether stablecoin issuers should offer yields to holders. He warned that poor handling of this matter might give non-U.S. options, including central bank digital currencies, a significant edge. Traditional financial players often push back against such innovations, but broader national interests in dollar primacy should guide decisions.

China Rolls Out Interest Payments for Digital Yuan Holdings

The People's Bank of China recently detailed a new policy allowing interest on digital yuan balances starting January 1, 2026. Commercial banks managing e-CNY wallets will provide compensation based on the amounts held by users. Deputy Governor Lu Lei described this as a transition toward treating the digital yuan more like deposit accounts rather than simple cash equivalents.

Years of pilot programs have built the infrastructure for the e-CNY, yet everyday consumer uptake has remained modest. Adding interest payments marks a strategic effort to make the currency more appealing for holding and spending. This change aligns with efforts to integrate the digital yuan deeper into China's financial system.

Shirzad shared a screenshot of reporting on the Chinese policy to underscore the timing of his message. The development illustrates how quickly the landscape for programmable money is changing across borders. U.S. policymakers now face clear examples of how competitors are adapting to attract users. Just earlier this month, Chinese Huaxia bank successfully issued $637 million in blockchain bonds via the digital yuan, marking a significant step in the integration of blockchain with the nation’s rapidly expanding CBDC ecosystem.

Stablecoins and central bank digital currencies both aim to modernize payments and asset handling in distinct ways. U.S. rules that prioritize compliance and reserves have built trust for dollar-pegged tokens globally. Balancing innovation with safeguards will determine whether American options retain their leading role in the years ahead.