Starting January 1, banks in China will be allowed to offer interest on balances in digital yuan wallets, intensifying discussions in the U.S. about the competitiveness of dollar-pegged stablecoins. The change is aimed at improving the integration of the e-CNY into bank operations.
Brian Armstrong, CEO of Coinbase, expressed concern on January 7 regarding this development, stating that it affords China a significant edge over U.S. stablecoins, which are currently restricted from offering yield under the GENIUS Act. This act, enacted in July 2025, established a federal framework for stablecoins but prohibits issuers from paying any form of interest.
With banks lobbying for an extension of this ban to cover third-party platforms, there are fears that such restrictions could undermine the U.S. dollar's position and favor China's interest-bearing currency. Crypto leaders argue that these limitations could hinder innovation and push stablecoin development outside the U.S. market.
Ron Tarter, CEO of MNEE, noted that a weakening dollar could lead to a reevaluation of dollar-denominated stablecoins as essential tools for maintaining U.S. economic dominance globally. He believes this scenario may expedite regulatory clarity for compliant stablecoins while presenting challenges for newer, less conventional designs.