China’s plan to start paying interest on its digital yuan is injecting new urgency into a simmering U.S. debate over stablecoin yields — and crypto proponents are now framing the issue as one of national security.
What’s changed
- Bloomberg reported that, beginning Jan. 1, Chinese commercial banks operating e-CNY wallets will pay interest to clients on their digital-yuan balances.
- That move gives momentum to crypto firms that argue U.S. stablecoins must remain competitively attractive to preserve dollar leadership in digital payments.
The U.S. clash: banks vs. crypto firms
- Since August, the Bank Policy Institute (BPI) — an umbrella group for traditional banks — has pushed lawmakers to ban yield-bearing stablecoins. The BPI warns that even modest stablecoin adoption could siphon deposits from banks and reduce credit availability for small businesses. Their asks: amend the GENIUS Act or insert restrictions into the ongoing crypto market structure bill.
- Crypto firms counter that banks are protecting a competitive moat. They point to higher yields available on some stablecoins (over 3%) versus sub-1% bank rates. Coinbase argues stablecoins see more use offshore than domestically and therefore aren’t an existential threat to U.S. banks. The BPI rejects that reassurance, saying any material stablecoin adoption will likely displace bank deposits and credit.
The national-security framing
- Jake Chervinsky, CLO at Variant Fund, pushed the rhetoric further: stablecoin yield is now a “national security” issue, not merely incumbents seeking protection. He called the GENIUS Act “a great victory for U.S. dollar dominance worldwide,” and warned that revisiting rewards would cede that advantage to China.
- Faryar Shirzad, Coinbase’s chief policy officer, made a similar point: mishandling yields in Senate negotiations could give non-U.S. stablecoins and CBDCs a “critical competitive advantage at the worst possible time.”
Market context and momentum
- Coinbase already pays interest on USDC; PayPal pays yield on PYUSD.
- The broader stablecoin market grew from about $254 billion to $307 billion following passage of the GENIUS Act in July. Interest-bearing DeFi stablecoins — including Maple’s sUSDS and BlackRock’s BUIDL — also expanded, rising from roughly $6 billion to over $12 billion in 2025, according to StableWatch. These shifts show rising demand for yield-bearing digital dollars and similar products.
Why it matters
- If lawmakers move to restrict or ban stablecoin yields, supporters argue the U.S. risks ceding ground to rivals rolling out yield-bearing digital currencies and CBDCs. Opponents say unrestricted yields could hollow out bank deposits and tighten credit for the real economy.
- With China already preparing to offer interest on its digital currency, the debate is likely to intensify as Congress negotiates the market-structure bill and any follow-ups to the GENIUS Act.
Sources: Bloomberg, StableWatch, posts from Coinbase and industry figures on X.
Disclaimer: This article is informational only and not investment advice. Cryptocurrency trading carries significant risk; readers should do their own research. © 2025 AMBCrypto.
Read more AI-generated news on: undefined/news
