- Brian Armstrong said China paying interest on the Digital Yuan gives it an edge if U.S. lawmakers restrict stablecoin rewards.
- Coinbase argues stablecoin rewards help consumers and adoption without harming bank lending or deposits, per multiple studies.
- The Senate debate pits innovation and dollar competitiveness against bank revenue concerns as stablecoin rules face review.
The U.S. Senate is currently debating whether stablecoin rewards should be restricted, raising concerns over competitiveness against China’s digital currency. Coinbase CEO Brian Armstrong highlighted that China’s decision to pay interest on the Digital Yuan benefits ordinary citizens and strengthens their market advantage. Armstrong warned this move could affect U.S. stablecoin competitiveness if rewards are banned.
China’s Digital Yuan and Interest Payments
China recently announced that users of the Digital Yuan would earn interest, aiming to boost adoption among regular citizens. According to Faryar Shirzad, Coinbase’s Chief Policy Officer, the timing aligns with the Senate Banking Committee considering restrictions on stablecoin rewards in the U.S.
Shirzad suggested that banning rewards could inadvertently aid China in undermining the U.S. dollar’s dominance. The Digital Yuan strategy focuses on broader accessibility, enabling everyday users to earn directly through their holdings.
Armstrong noted that interest payments, similar to community lending, empower ordinary people while increasing adoption. He emphasized that these rewards do not materially affect lending but significantly impact stablecoin competitiveness.
Stablecoin Rewards and U.S. Banking Debate
Congress is currently reviewing the Market Structure bill, which may reopen discussions on stablecoin rewards. According to Shirzad, this creates uncertainty, as stablecoin rewards have previously been settled under the GENIUS Act.
U.S. banks earn approximately $176 billion annually on deposits at the Federal Reserve and another $187 billion from card fees, making rewards a threat to their revenue streams. Research cited by Shirzad supports that stablecoin adoption does not reduce community-bank deposits or lending capacity.
Studies from Charles River Associates and Cornell University indicate no significant relationship between stablecoin growth and traditional bank deposits. Rewards would need to exceed 6% to meaningfully divert deposits, far above current offerings.
Shirzad also highlighted that stablecoins represent an opportunity for banks to modernize payment systems. Lowering costs and increasing options could stimulate competition while preserving banking operations.
The discussion around rewards continues to emphasize balancing consumer benefits against established banking interests, without threatening lending infrastructure.
