Coinbase Warns U.S. Is at Risk of Losing the Stablecoin Race

In a post on X, Faryar Shirzad, Coinbase’s chief policy officer, said ongoing debate over whether U.S.-issued stablecoins should be allowed to offer “rewards” risks weakening the international appeal of dollar-based digital assets. Shirzad argued that restricting such incentives could hand an advantage to foreign alternatives at a time when rival financial systems are moving quickly to make their digital currencies more attractive.

Key takeaways:

• U.S. stablecoin policy changes could reduce the global competitiveness of dollar-linked digital assets.
• The debate centers on whether stablecoin-related “rewards” should remain permitted under current law.
• Rival payment systems and central bank digital currencies are rapidly improving their appeal.
• Policy decisions made now could shape leadership in global digital payments for years.

China moves to boost digital yuan competitiveness

Shirzad pointed to a recent announcement from the People’s Bank of China, which outlined plans to allow commercial banks to pay interest on balances held in digital yuan wallets beginning Jan. 1, 2026. According to Lu Lei, the change would mark a shift in the e-CNY’s role, moving it beyond a simple digital cash substitute and integrating it into banks’ broader asset and liability management.

Lu said the digital yuan is evolving into what he described as a “digital deposit currency,” capable of functioning as a unit of account, store of value, and tool for cross-border payments. The move is widely seen as an effort to make China’s central bank digital currency more competitive with private-sector payment systems and dollar-linked stablecoins.

Stablecoin rewards debate raises policy concerns

The warning comes as U.S. lawmakers continue to debate aspects of the GENIUS Act, which passed in June. The legislation established reserve and compliance requirements for stablecoin issuers while prohibiting them from paying direct interest. However, it allows platforms and third parties to offer rewards tied to stablecoin usage, a provision that has become a focal point of recent negotiations.

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Shirzad cautioned that revisiting or narrowing those provisions could damage the global standing of U.S. stablecoins. He warned that mishandling the issue during Senate talks on broader market structure legislation could give non-U.S. stablecoins and central bank digital currencies a meaningful competitive edge “at the worst possible time.”

Industry figures have echoed those concerns, pointing to renewed pressure from bank lobbyists to reopen the law. Some of them noted that while banks earn meaningful returns on reserves held at the Federal Reserve, consumers typically receive minimal interest on savings accounts. Stablecoin platforms, he argued, challenge that model by offering to share yield with users.

Coinbase leadership draws a line

The debate has also drawn strong comments from Coinbase’s top leadership. Brian Armstrong, the company’s chief executive, said last week that any attempt to reopen the GENIUS Act would cross a “red line,” accusing banks of lobbying Congress to restrict stablecoin rewards in order to protect their deposit base.

Armstrong said Coinbase would continue to oppose revisions to the law and expressed surprise at how openly the lobbying campaign has played out. He added that traditional banks are likely misjudging the long-term trajectory of digital assets, predicting they will eventually seek to offer yield-bearing stablecoin products themselves once the opportunity becomes unavoidable.

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