A senior Coinbase executive has warned that a potential misstep by US lawmakers on stablecoin policy could affect the US’s leadership in the digital payment sector. He believes this could give a strategic advantage to China as the country is accelerating the development of its central bank digital currency.
Faryar Shirzad, a Coinbase chief policy officer, posted on X.com that the ongoing debate in the US Senate over stablecoin “rewards” risks weakening the global competitiveness of dollar-backed stablecoins. The latest discussion in the Senate centers on how provisions of the GENIUS Act should be interpreted as Congress negotiates broader crypto market structure legislation.
Shirzad compared the uncertainty in Washington with the rapid policy movement in Beijing. This week, the People’s Bank of China announced a framework that will allow commercial banks to pay interest on balances held in digital yuan wallets from January 1, 2026. This is a significant win for China’s central bank digital currency, known as e-CNY.
According to Lu Lei, a deputy governor at the PBOC, digital currency will support value storage, pricing, and cross-border payments, broadening its role in the financial system.
Stablecoin Rewards Under Scrutiny
The GENIUS Act, passed in June, set reserve and compliance requirements for stablecoin issuers and stopped them from paying direct interest. However, it allows platforms and third parties to offer rewards linked to stablecoin usage, a distinction that has become a point of interest in Senate negotiations.
Shirzad warned, “If this issue is mishandled in Senate negotiations on the market structure bill it could hand our global rivals a big assist in giving non-US stablecoins and CBDCs a critical competitive advantage at the worst possible time.”
Industry analysts argue that traditional banks are pushing to revisit the law to protect their deposit fees. Crypto policy analyst Max Avery said banks currently earn roughly 4% on reserves held at the Federal Reserve, while many consumers receive little or no interest on savings accounts. Stablecoins that share yield with users are a direct threat to this banking model.
Coinbase CEO Brian Armstrong has described any attempt to repeal the GENIUS Act as a “red line,” accusing banks of lobbying Congress to restrict stablecoin rewards. He called such efforts unethical and predicted that banks would eventually seek to offer yield-bearing stablecoins themselves once the commercial opportunity becomes clear.
