China CBDC interest policy challenges US stablecoin competitiveness
China’s decision to allow banks to pay interest on digital yuan wallets is intensifying the global debate over stablecoin regulation and dollar competitiveness. As the United States enforces strict limits on stablecoin yield under the GENIUS Act, policymakers and industry leaders are questioning whether US digital dollars can compete with an interest-bearing central bank digital currency.
Starting January 1, Chinese commercial banks can pay interest on balances held in digital yuan (e-CNY) wallets. Officials say this move helps integrate the central bank digital currency into the traditional banking system and encourages broader adoption. By allowing yield, China positions the digital yuan as both a payment tool and a store of value.
Coinbase CEO Brian Armstrong warned in a post on Jan. 7;
In contrast, the GENIUS Act, enacted in July 2025, explicitly bans US stablecoin issuers from paying any form of interest or yield. The restriction aims to protect bank deposits, but critics argue it leaves dollar-backed stablecoins structurally weaker than competing digital currencies.
Industry leaders warn that banning yield could push innovation offshore and weaken the global role of the US dollar. As inflation concerns grow, users increasingly seek digital assets that preserve purchasing power and offer returns, driving interest in alternative stablecoin designs and real-world-asset backing.
While major changes to the GENIUS Act appear unlikely, enforcement intensity could shift after the 2026 midterms. For now, stablecoin issuers are expected to operate under the assumption that current rules will remain, even as China accelerates its digital currency strategy and reshapes the competitive landscape of digital money.
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