Coinbase is pushing back against efforts to limit interest in stablecoins in the United States, warning that such restrictions could end up helping China. The warning comes as lawmakers debate how the GENIUS Act, which became law in July, should be introduced a new a set of rules stablecoins. Time is very important, with China getting ready allowing users to earn interest on their digital currency from early next year.
How US Stablecoin Interest Rules Work
Currently, the law prevents stablecoin issuers in the US from paying interest directly to users. However, some platforms have been offering rewards with workarounds that allow users to earn profits without violating the specific wording of the law.
Banking groups are asking regulators to block those options down and, arguing that any kind of reward linked to stablecoins that can take money out of banks and shake up the traditional system.
Crypto firms are pushing back, saying this goes further than lawmakers originally intended and risks cutting off innovations that help the space grow.
Why Coinbase Worries about the Big Picture
Coinbase’s policy team says that if the US ends up tightening the rules around stablecoin rewards, people and businesses may take their money elsewhere. China’s central bank is preparing to offer interest on its digital yuan from January 2026.
That kind of return would make the digital yuan more attractive for both payments and long-term holdings compared to US coins that don’t give any yield at all. Coinbase believes that this could reduce the attractiveness of dollar-based tokens around the world and make it difficult for the US to maintain its influence in the developing world of digital currency.
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Banks Seek Stronger Stabilization
On the other side of the argument, major banking groups are telling regulators to crack down on any stablecoin product that even resembles a savings account. They say that interest-bearing tokens could cause massive withdrawals from traditional banks as well create accidents for comprehensive financial system.
Their position is that stablecoins should only used as payment instruments, not as an investment, and any loopholes to allow the harvest must be closed before them grow up to be a big problem.
How the Market Can Be Affected
If regulators decide to ban all types of yields on stablecoins, platforms currently offering rewards may have to stop or change the way they operate. That could make US stablecoins less competitive, especially as other countries move forward with digital currencies that offer more incentives.
Coinbase and others argue that some sort of reward system is essential to keeping dollar-based stablecoins fair and attractive to users. Without it, they risk losing ground to other outside options that bring better returns.
You can’t disable your builders and expect to move forward.
If China allows yields and the US does not, the competitive gap is immediately apparent.– ATEG Capital (@Ateg_Capital) December 31, 2025
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What’s Next for Lawmakers and Industry
The debate about stablecoin interest is part of a larger discussion about crypto legislation in the US As Congress works by using extensive debts a cover digital assets, is expected to keep this issue alive focus.
Lawmakers and regulators are under increasing pressure to strike a middle ground between protecting financial stability and remaining competitive in the digital economy. Meanwhile, platforms and investors are closely watching how regulators implement the GENIUS Act and what it will mean for stablecoin usage going forward.
The decision over even thought or not allowing stablecoin rewards may seem small, but it could play a big role in shaping how the US competes in global finance. And other nations are ready to give better terms to their own digital funds, what happens next can have long-term consequences for the the role of the dollar in the digital world.
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Key Takeaways
- Coinbase has warned that banning interest in US stablecoins could reduce America’s position in global digital finance.
- The debate centers on the GENIUS Act, which prohibits stablecoin issuers from paying interest directly to owners.
- Banking groups are pushing regulators to ban all forms of stablecoin mining, including indirect reward structures.
- China plans to allow interest in its digital yuan from January 2026, which Coinbase says could attract global users.
- A blanket ban on interest could shift users and innovators from US social media to foreign digital currencies
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