US Banks’ Push To Ban Stablecoin Rewards Could Hand Global Advantage To China, Execs Warn
After China’s newest transfer with its Digital Yuan, a number of crypto business executives have cautioned that the US banks’ push to ban all curiosity funds on stablecoins may give a significant benefit to their international rivals.
US Risks Giving China A Major Global Advantage
On Tuesday, Coinbase’s Chief Policy Officer (CPO), Faryar Shirzad, warned the US Congress that banning curiosity funds on the digital property may danger diminishing the legislative efforts and victories obtained this yr with the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act.
In an X put up, Shirzad affirmed that “tokenization is the longer term and the GENIUS Act was a visionary transfer by POTUS and Congress to make sure US greenback stablecoins issued beneath US guidelines could be the first settlement instrument of the longer term.”
However, Shirzad famous that the “sobering and well timed” announcement by the People’s Bank of China of its plan to pay curiosity on the Digital Yuan may pose an even bigger downside to the US than buyers assume.
As reported by Bitcoinist, China is about to begin paying curiosity on its Digital Yuan (e-CNY). Deputy Governor on the People’s Bank of China, Lu Lei, not too long ago shared a brand new framework that may redefine the foundations of digital forex, giving it the identical authorized standing as deposits held at banks.
Under the brand new framework, business banks that handle Digital Yuan wallets will be capable of pay curiosity to purchasers primarily based on the quantity of e-CNY they maintain, ranging from January 1, 2026.
Based on this, Shirzad cautioned that “If this situation is mishandled in Senate negotiations available on the market construction invoice, it may hand our international rivals an enormous help in giving non-US stablecoins and CBDCs a vital aggressive benefit on the worst potential time.”
Stablecoin Rewards: A ‘Matter Of National Security’
Coinbase’s CPO added that though “lobbyists for entrenched incumbents will at all times struggle change,” it’s essential for Congress to “shield the primacy of the US greenback and the US monetary system, “not simply incumbent pursuits.”
Similarly, different crypto executives agreed with Shirzad’s assertion, together with Coinbase’s Chief Executive Officer (CEO) Brian Armstrong and Variant’s Chief Legal Officer (CLO) Jake Chervinsky.
Armstrong emphasized that US “stablecoins should stay aggressive on a worldwide stage. Meanwhile, Chervinsky asserted that banks’ push to ban stablecoin rewards “isn’t only a matter of incumbents looking for a regulatory moat. It’s a matter of nationwide safety.”
To the lawyer, revisiting the difficulty of curiosity funds on USD-pegged tokens would weaken the victory that the GENIUS Act gave to US greenback dominance worldwide and “hand that win to China.”
Notably, the banking sector has criticized the US’s landmark stablecoin laws over the previous few months, arguing that it has loopholes that would pose dangers to the monetary system.
The crypto framework, which was signed into regulation by President Trump in July, prohibits curiosity funds on the holding or use of payment-purpose stablecoins. Nonetheless, the prohibition solely addresses issuers, which means that it may very well be “simply circumvented” by exchanges or associates offering rewards.
Earlier this yr, a number of banking associations throughout the US despatched a joint letter to the Senate Banking Committee urging Congress to amend the regulation. The banking teams claimed that curiosity funds would distort market dynamics and will have an effect on credit score creation. Therefore, they prompt extending the prohibition to incorporate digital asset exchanges, brokers, sellers, and associated entities.
Shirzad, alongside a number of crypto business gamers, has rejected these issues over the previous a number of months, stating that the banking sector’s proposals may threaten to create an uncompetitive atmosphere for USD-denominated tokens.
In October, Coinbase’s CPO slammed the monetary establishment’s narrative that stablecoins would destroy financial institution lending, concluding that it “ignores actuality” and misreads the essential second.
