2026

Brian

would

China’s move to let banks pay interest on digital yuan wallets from Jan. 1 is sharpening the debate in Washington over whether United States dollar stablecoins are being left structurally uncompetitive by the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act’s ban on yields.&nbsp;
The move <a href="https://cointelegraph.com/news/coinbase-exec-warns-senate-stablecoin-misstep-could-hand-china-a-global-edge" rel="noopener noreferrer nofollow">allows China’s commercial banks to pay interest</a> on balances held in e‑CNY wallets, with officials framing it as a way to better integrate the <a href="https://cointelegraph.com/learn/articles/what-is-a-cbdc-why-central-banks-want-to-get-into-digital-currencies" rel="noopener noreferrer nofollow" target="_self">central bank digital currency (CBDC</a>) into bank balance sheets.
​Coinbase CEO Brian Armstrong warned in an X post on Wednesday that the decision gives China a “competitive advantage” over US dollar stablecoins and has a “big impact on whether US stablecoins are competitive.”
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 <img alt="China’s interest-bearing digital yuan piles pressure on US stablecoin rules" src="https://s3.cointelegraph.com/uploads/2026-01/019b9d7a-6b2c-72c8-8038-0a0da69d0341.png" title="">
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 US stablecoins are being left “uncompetitive.” Source: <a href="https://x.com/brian_armstrong/status/2008929016565404003?s=20" rel="noopener noreferrer nofollow" target="_blank">Brian Armstrong</a>
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Armstrong’s latest comments build on a broader warning he has delivered to lawmakers over the past year. In April 2025, he argued that Congress should allow <a href="https://cointelegraph.com/news/coinbase-ceo-calls-change-stablecoin-laws-enable-onchain-interest" rel="noopener noreferrer nofollow" target="_self">regulated stablecoin firms to pay users interest</a>, maintaining that bans on yield would push innovation offshore.&nbsp;
Related: <a href="https://cointelegraph.com/news/china-digital-yuan-interest-wallets-2026" rel="noopener noreferrer nofollow" target="_self">China to let banks pay interest on digital yuan wallets from January 2026</a>
<h2 id="genius-act-bank-lobby-and-the-rewards-fight">​GENIUS Act, bank lobby and the “rewards” fight</h2>
The <a href="https://cointelegraph.com/learn/articles/genius-act-how-it-could-reshape-us-stablecoin-regulation" rel="noopener noreferrer nofollow" target="_self">GENIUS Act</a>, signed into law in July 2025, created a federal framework for dollar‑pegged stablecoins, but included a clause that prevents issuers from paying “any form of interest or yield.”&nbsp;
Banks have since lobbied to widen that ban to third‑party platforms, warning that stablecoin rewards could siphon deposits away from the traditional banking system, particularly smaller lenders.&nbsp;
Crypto executives and industry groups have pushed back, warning that <a href="https://cointelegraph.com/news/genius-act-stablecoin-rewards-debate-crypto-industry-executives-banks-senate" rel="noopener noreferrer nofollow">banning third‑party stablecoin yields</a> would entrench banks, weaken US dollar competitiveness, and hand an advantage to China’s interest‑bearing digital yuan.
<h2 id="new-stablecoin-designs-in-a-weaker-dollar-world">New stablecoin designs in a weaker-dollar world</h2>
​This policy backdrop is colliding with a shifting macro environment and new stablecoin designs.&nbsp;
Ron Tarter, CEO of MNEE, a US dollar-backed stablecoin issuer, told Cointelegraph that a weaker dollar in 2026 could prompt US lawmakers to view dollar‑denominated stablecoins as “strategic tools to preserve dollar hegemony in global commerce.”
He said it could potentially accelerate regulatory clarity for compliant US dollar stablecoins, while “more experimental designs” such as algorithmic stablecoins and “stablecoins that aren’t backed by US dollars,” might face higher barriers.&nbsp;
Reeve Collins, cofounder of Tether and chairman of STBL, the entity behind the USST stablecoin, said the value proposition of stablecoins had already shifted from pure access and speed to preserving purchasing power and “beating inflation.”&nbsp;
He told Cointelegraph, “That naturally drives demand toward new designs, including stablecoins backed by real-world assets and structures that share yield with users rather than concentrating it with the issuer.”
Related: <a href="https://cointelegraph.com/magazine/how-crypto-laws-changed-2025-further-2026/" rel="noopener noreferrer nofollow" target="_self">How crypto laws changed in 2025 — and how they’ll change in 2026</a>
<h2 id="midterms-and-enforcement-risks">Midterms and enforcement risks</h2>
Looking into politics and the likelihood of a weak performance by <a href="https://cointelegraph.com/news/ray-dalio-2026-us-midterm-reverse-trump-policy" rel="noopener noreferrer nofollow">Republicans in the 2026 midterms</a>, Drew Hinkes, a partner with Winston &amp; Strawn law firm, weighed in on how that may affect crypto policy.&nbsp;
He argued that an outright repeal of the GENIUS Act after the 2026 midterms was “highly unlikely,” but warned that a change in control of Congress could slow or block a broader market structure bill and reshape regulatory enforcement.
When asked how stablecoin issuers should think about legal and regulatory risk in that environment, Hinkes noted that digital asset firms “have always existed in an environment of regulatory uncertainty,” but that a change in control of Congress was “unlikely to materially impact stablecoin issuers.”
Tarter, a former lawyer, said that crypto companies “should operate on the assumption that the GENIUS Act will remain in place, and the Clarity Act will pass before the midterms.”
Still, they should “document their compliance rigorously,” as any shift to a more aggressive Securities and Exchange Commission (SEC) or Commodity Futures Trading Commission (CFTC) could tighten the screws on US stablecoins just as China steps up its own digital money experiment.

China’s interest-bearing digital yuan piles pressure on US stablecoin rules

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