US Stablecoin Rewards Ban Could Boost China’s Digital Yuan
Background is extremely murky; lots of confusion swirling over recent talks about stablecoin regulations. It looks increasingly likely that banning stablecoin rewards in the United States could give China’s digital yuan an extremely strong competitive edge in the global digital finance space. This is a really big deal because the US dollar has been king in digital finance, but a ban on stablecoin rewards could be America’s worst nightmare. That’s according to sources close to the issue, who warn that this move would severely weaken the US dollar’s control over digital payments, and China would seize this opportunity. You need to understand that China is busy upgrading its state-backed digital currency, making it much more attractive to users than US stablecoins.
US Regulatory Landscape
has become a minefield with all sorts of different opinions over stablecoin regulations. Coinbase chief policy officer, Faryar Shirzad, is sounding the alarm over restrictions around rewards that could make dollar-backed stablecoins less attractive overseas. He points out how fast the global environment is changing, pointing to China’s moves on its digital yuan, as an example. The United States has been dealing with its own stablecoin rules – the GENIUS Act sets out reserve and compliance standards for issuers and bars them from paying direct interest, but still allows platforms to offer indirect rewards. Industry experts are now warning that changes happening in Senate negotiations on a broader market structure bill could tip the balance further, potentially giving non-US stablecoins and CBDCs a competitive edge. Traditional banking interests are pushing hard to revisit the law, and they’re starting to gain traction.
China’s Digital Yuan Initiative
is quickly evolving; People’s Bank of China recently announced a framework that lets commercial banks pay interest on balances in digital yuan wallets, starting from January 2026. This is a big deal, as it means the e-CNY will be integrated into banks’ asset and liability operations, and won’t just be used as a digital version of cash. China plans to expand national usage of the digital yuan and build supporting infrastructure by 2030. It’s pretty interesting because the e-CNY has already processed an enormous 3.48 billion transactions worth 16.7 trillion yuan ($2.34 trillion) across 230 million personal wallets and nearly 19 million corporate wallets by November 2025. The introduction of interest-bearing digital yuan wallets aims to address long-standing complaints over a lack of incentives and ongoing privacy concerns.
Market Reaction & Risks
is getting more intense; the policy has triggered a surge in market activity, with Chinese investors throwing in over $188 million into digital yuan-related stocks. There’s also been a flurry of warnings from authorities over scams exploiting the new interest feature, which highlights the trust issues the system still faces. This could be a good thing, though, as it might force the system to evolve faster. In this day and age, that’s crucial for success in the global financial market. We’re getting into a lot of uncharted territory, and things can get messy quick.
US Approach to Digital Currencies
is starkly different from everything else. In January, President Donald Trump signed an executive order stopping federal agencies from issuing or supporting a central bank digital currency. This was for good reason, because there are real risks to financial stability, personal privacy, and national sovereignty, and this prevents them from happening. The administration showed support for regulated stablecoins as the preferred digital dollar model, though.
