Coinbase warns about 'U.S. stablecoin policy'... "Concern China could benefit"

U.S. cryptocurrency exchange Coinbase said that if interest payments on dollar stablecoins are prohibited, China could benefit.

Faryar Shirzad, Coinbase's chief policy officer (CPO), said on the 31st (local time) via X, "China's recent announcement that the People's Bank of China will pay interest on the digital yuan is a very timely warning in the debate over whether to allow rewards (interest) for stablecoins issued in the United States."

Earlier, the People's Bank of China announced on the 29th that "from January next year, it will allow commercial banks to pay interest on the digital yuan." This means effectively granting the digital yuan the same legal status as deposit money. The digital yuan is a central bank digital currency (CBDC) issued by the People's Bank of China.

Meanwhile, the U.S. Genius Act (Stablecoin Act) prohibited stablecoin issuers from paying interest. In response, the U.S. Blockchain Association recently sent a letter to the U.S. Congress expressing opposition to that provision of the Genius Act.

Shirzad, the CPO, emphasized, "If this issue is mishandled during negotiations over the cryptocurrency market structure bill (Clarity Act) currently being discussed in the Senate, it could give non-dollar stablecoins and CBDCs a decisive competitive advantage." He said, "(If that happens) the timing would also be the worst," and "what those negotiating the (Clarity Act) should protect is the U.S. dollar and the hegemonic position of the financial system, not the interests of incumbent businesses."

Meanwhile, the American Bankers Association (ABA) said the Genius Act's provision banning interest payments on stablecoins should be strictly enforced. The Block reported that "the American Bankers Association argues some cryptocurrency exchanges are interpreting the Genius Act to allow reward-type incentives for (stablecoins), which could undermine traditional banking activities."