The global contest over digital money is starting to look less theoretical and more strategic. While U.S. lawmakers debate how tightly to restrict stablecoins, China is actively upgrading its own state-backed digital currency in ways that could reshape user incentives worldwide.
That contrast has triggered concern inside the U.S. crypto industry. Executives now warn that policy choices meant to contain risk could instead weaken America’s position in digital payments at the exact moment international competition is heating up.
Key Takeaways
China plans to allow interest on its digital yuan starting in 2026 to boost adoption.
U.S. stablecoins are restricted from paying rewards under the GENIUS Act.
Coinbase warns strict enforcement could push users toward foreign digital currencies.
How the U.S. applies stablecoin rules may shape global digital payment competition.
China leans into incentives
Beijing is taking a notable step to revive interest in its central bank digital currency. Beginning in 2026, banks will be permitted to offer interest on balances held in the digital yuan, also known as the e-CNY. That decision marks a shift away from treating the currency purely as digital cash.
By adding yield, China is effectively positioning the e-CNY closer to a bank deposit than a payment-only instrument. The move is widely viewed as an attempt to accelerate adoption after years of pilots failed to gain mass traction. Interest-bearing balances could also make the digital yuan more attractive for cross-border trade and settlements, particularly in regions already integrated with China’s financial system.
Why U.S. stablecoin rules are under scrutiny
Across the Pacific, the debate is moving in the opposite direction. In the United States, the GENIUS Act restricts dollar-backed stablecoin issuers from paying interest or rewards to users, reflecting lawmakers’ desire to prevent stablecoins from functioning like savings products.
That restriction is now being reevaluated as enforcement discussions unfold. Faryar Shirzad, the chief policy officer at Coinbase, has argued that a hard ban on rewards could backfire. In his view, digital currencies compete on usability and incentives, not just regulatory approval. If U.S. stablecoins are locked into a payment-only role while foreign alternatives offer yield, users may simply migrate elsewhere.
From Coinbase’s perspective, the original goal of the GENIUS Act was to help compliant, dollar-backed stablecoins scale globally. Overly strict enforcement, Shirzad warns, risks undermining that ambition and weakening the dollar’s digital footprint.
A widening industry divide
The disagreement is not limited to crypto companies. In December, the Blockchain Association and more than 125 firms urged U.S. lawmakers to avoid expanding or aggressively enforcing the reward ban. They argue there is little evidence that stablecoin incentives threaten community banks and warn that innovation could be pushed offshore.
Traditional banking groups see it differently. The American Bankers Association has called for strict enforcement, claiming that reward programs already blur the line between stablecoins and deposits and could pull funds out of the banking system.
Digital money as geopolitical leverage
Taken together, these developments highlight a broader shift. Digital currencies are no longer just financial products – they are becoming tools of geopolitical influence. China is experimenting with incentives to expand the reach of its sovereign currency, while the U.S. risks constraining its private-sector alternatives through regulation.
The concern voiced by Coinbase and others is that the outcome may not hinge on technology, but on policy design. As countries compete to define the future of digital payments, the balance between safety, innovation, and global competitiveness is becoming harder to maintain.
How the GENIUS Act is ultimately enforced could determine whether U.S. dollar stablecoins remain attractive on the world stage – or whether yield-bearing foreign digital currencies begin to pull ahead.
