China’s move to pay interest on the E-CNI has sparked debate over the US stablecoin

China will allow interest on digital yuan (e-CNI) holdings from 2026. US banks and crypto companies clash over Genius Act ban enforcement Coinbase executive warns stablecoin product bans could weaken US global competitiveness

China's central bank, the People's Bank of China (PBOC), announced earlier this week that it will allow commercial banks to charge interest on their holdings of digital yuan, also known as e-CNI.

The new framework is scheduled to go into effect on January 1, 2026, and PBOC Deputy Administrator Lu Li said the change would shift e-CNN from digital cash to what he described as “digital deposits” designed to boost user adoption.

China has spent several years testing the digital yuan in various cities and use cases, including retail payments and public services.

However, adoption has been slower than policymakers initially expected.

Analysts say allowing interest payments could make e-CNN competitive with traditional bank deposits and private digital payment platforms, which could accelerate its use domestically and eventually cross-border transactions.

In the United States, the debate revolves around how to interpret and apply the Genius Act's ban on usury.

The law, which went into effect in July, was intended to focus the payment stablecoin on transactional uses rather than savings or investment products.

Allowing banking groups to issue stablecoins blurs the line between deposits and crypto assets, potentially threatening financial stability and draining funds from regulated banks.

Crypto industry groups strongly disagree.

In a December 18 letter to lawmakers, the Blockchain Association and more than 125 industry participants urged Congress not to expand or strictly enforce the ban on stablecoin rewards.

The group warned that claims that Statcoin incentives pose a threat to community banks are not supported by evidence and that overly strict rules could push innovation offshore.

The American Bankers Association, in a letter sent on the same day, called for strict enforcement of the Genius Act.

The group says some crypto companies are trying to circumvent the spirit of the law by offering reward-like incentives similar to interest and potentially disrupting traditional banking activities.

Coinbase executive warns that China may take down the US

A top executive at Coinbase has warned that the United States could weaken its own position in the future of digital finance if lawmakers ban interest-bearing stablecoins, just as China moves to make central bank digital currency (CBDC) more attractive by allowing it to pay interest.

Coinbase chief policy officer Faryar Shirzad said this week that limiting US dollar-denominated stablecoin rewards would give foreign competitors, especially China, a competitive edge.

Shirzad's comments come amid growing debate in Washington over the implementation of the recently passed Genius Act, which would prohibit US dollar payments from paying stablecoin interest or directly to consumers.

In an article on X, Shirzad argued that global competition in digital currency is intensifying.

He points to China's recent policy shift as evidence that there are incentives to adopt new forms of currency.

According to Shirzad, if the United States restricts the use of stablecoins backed by the dollar, it risks weakening the global role of the dollar if other states act more aggressively.

Shirzad's Genius Act is intended to make US-controlled dollar-backed stablecoins the primary settlement tools in a tokenized global economy.

He warned that mishandling the prize claim could give non-US stablecoins and CBCCs an advantage at critical times.