China’s Interest-bearing Digital Yuan Piles Pressure On Us... (2026)
China’s move to pay interest on the digital yuan is colliding with the GENIUS Act’s ban on stablecoin yield, intensifying questions over whether US digital dollars can stay competitive.
China’s move to let banks pay interest on digital yuan wallets from Jan. 1 is sharpening the debate in Washington over whether United States dollar stablecoins are being left structurally uncompetitive by the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act’s ban on yield.
The change allows commercial banks to pay interest on balances held in e‑CNY wallets, with Chinese officials framing it as a way to better integrate the central bank digital currency (CBDC) into bank balance sheets.
Coinbase CEO Brian Armstrong warned in an X post on Jan. 7 that the decision gives China a “competitive advantage” over US dollar stablecoins and has a “big impact on whether US stablecoins are competitive.”
Armstrong’s latest comments build on a broader warning he has delivered to lawmakers over the past year. In April 2025, he argued that Congress should allow regulated stablecoin firms to pay users interest, stating that bans on yield would push innovation offshore.
Related: China to let banks pay interest on digital yuan wallets from January 2026
The GENIUS Act, signed into law in July 2025, created a federal framework for dollar‑pegged stablecoins but included a clause that prevents issuers from paying “any form of interest or yield.”
Banks have since lobbied to widen that ban to third‑party platforms, warning that stablecoin rewards could siphon deposits away from the traditional banking system, particularly smaller lenders.
Crypto executives and industry groups have pushed back, warning that banning third‑party stablecoin yields would entrench banks, weaken US dollar competitiveness, and hand an advantage to China’s interest‑bearing digital yuan.
This policy backdrop is colliding with a shifting macro environment and new stablecoin designs.
Source: CoinTelegraph
