Coinbase Cautions That US “Rewards” Prohibition May Allow China to Prevail in the Stablecoin Competition

Coinbase has cautioned that a renewed initiative in Washington to limit how stablecoins can offer rewards to users may undermine the United States’ standing in digital payments, particularly as China is actively enhancing its own state-supported digital currency to increase its appeal.

Faryar Shirzad, Coinbase’s chief policy officer, expressed this concern in a post on X, contending that restrictions on rewards could diminish the attractiveness of dollar-pegged stablecoins in international markets.

For those who fail to grasp the implications of the discussion surrounding rewards on US-issued stablecoins under the GENIUS Act, a sobering and timely announcement from the People’s Bank of China indicates their intention to provide interest on the Digital Yuan.
Tokenization is the future and… pic.twitter.com/stg8ffKzT7

— Faryar Shirzad (@faryarshirzad) December 30, 2025

He noted that the matter is particularly critical as competing systems strive to enhance the competitiveness of their digital currencies.

Shirzad specifically highlighted China’s recent developments regarding its central bank digital currency, the digital yuan, as an illustration of the rapidly evolving global landscape.

As China Enhances Digital Yuan, Coinbase Raises Concerns Over U.S. Stablecoin Restrictions

Earlier this week, the People’s Bank of China introduced a framework that will enable commercial banks to offer interest on balances maintained in digital yuan wallets starting January 1, 2026.

China’s PBOC has launched a digital yuan action plan for the upcoming year, aimed at improving the CBDC’s management and financial infrastructure. #PBOC #DigitalYuan #ChinaCBDChttps://t.co/sKEBAfgcve

— Cryptonews.com (@cryptonews) December 29, 2025

Lu Lei, a deputy governor at the PBOC, stated that this modification would extend the e-CNY beyond its initial function as a digital cash equivalent and incorporate it into banks’ asset and liability management.

In the United States, the conversation is taking place against the backdrop of the GENIUS Act, which was enacted in July as the nation’s first comprehensive framework for stablecoins.

A provision in the GENIUS Act seeks to limit the influence of technology giants and major financial institutions within the US stablecoin sector. #GENIUS #Stablecoinshttps://t.co/IE7FZdWjXw

— Cryptonews.com (@cryptonews) July 21, 2025

The legislation established reserve and compliance requirements for issuers and prohibited them from offering direct interest while permitting platforms and third parties to provide rewards linked to stablecoin usage.

Shirzad cautioned that modifications during Senate discussions on a broader market structure bill could further shift the balance, potentially granting non-US stablecoins and CBDCs a competitive advantage.

Industry analysts indicate that traditional banking interests are exerting pressure to revisit the law.

Crypto policy commentator Max Avery noted that banks, which currently receive approximately 4% on reserves held at the Federal Reserve, have little motivation to see that yield distributed more broadly.

Conversely, stablecoin platforms have contended that sharing some of that return with users through rewards is a key factor in the attractiveness of their products.

China Advances Digital Yuan Development as Private Applications Remain Dominant

China continues to progress with its CBDC despite prohibiting cryptocurrency trading and stablecoins within its borders. Its latest action plan, spanning 2026 to 2030, aims to broaden the national adoption of the digital yuan and enhance the supporting infrastructure.

By November 2025, the e-CNY had facilitated 3.48 billion transactions totaling 16.7 trillion yuan, or approximately $2.34 trillion, across 230 million personal wallets and nearly 19 million corporate wallets.

The rollout of interest-bearing digital yuan wallets is widely perceived as a response to persistent complaints.

Adoption has fallen behind private payment platforms such as Alipay and WeChat Pay, which together dominate over 90% of China’s mobile payments market.

Users have pointed to a lack of incentives and ongoing privacy concerns as reasons for continuing to use existing applications, despite years of pilot initiatives.

The policy has already sparked a surge in market activity, with Chinese investors investing over $188 million into digital yuan-related stocks following the announcement.

Chinese investors inject $188 million into digital yuan stocks after PBOC announces interest-bearing CBDC wallets starting January 2026. #China #CBDChttps://t.co/mhze2uEyHn

— Cryptonews.com (@cryptonews) December 30, 2025

Simultaneously, authorities have issued warnings regarding scams taking advantage of the new interest feature, underscoring the trust issues the system continues to face.

In contrast, the U.S. has adopted a significantly different stance. In January, President Donald Trump signed an executive order prohibiting federal agencies from issuing or endorsing a central bank digital currency.

The administration cited concerns regarding financial stability, personal privacy, and national sovereignty while expressing support for privately issued, regulated stablecoins as the preferred model for a digital dollar.

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