The People's Bank of China said the e-CNY will transition from functioning as digital cash to operating as digital deposit currency, according to PBOC Deputy Governor Lu Lei.
Stablecoin News
Coinbase Chief Policy Officer Faryar Shirzad cautioned that restricting rewards on U.S.-issued stablecoins could give global rivals a strategic advantage as China prepares to pay interest on its digital yuan. The warning comes as debate intensifies over enforcement of the GENIUS Act's interest prohibition.
China's central bank announced it will allow commercial banks to pay interest on digital yuan holdings under a new framework effective Jan. 1, 2026. The People's Bank of China said the e-CNY will transition from functioning as digital cash to operating as digital deposit currency, according to PBOC Deputy Governor Lu Lei.
Shirzad wrote on X Tuesday that the competitive landscape for digital money is evolving. He pointed to China's move as evidence that mishandling stablecoin rewards in Senate negotiations over the market structure bill could give non-U.S. stablecoins and central bank digital currencies a meaningful competitive edge.
The GENIUS Act, passed into law in July, bars issuers of U.S. dollar payment stablecoins from paying interest or yield directly to holders. The law aims to keep stablecoins focused on payments rather than functioning as interest-bearing deposit alternatives.
Crypto firms argue that limiting rewards could weaken U.S. stablecoin competitiveness against foreign alternatives and CBDCs. Banking groups are urging regulators to enforce a broad prohibition, warning that some crypto exchanges interpret the law in ways that allow reward-like incentives.
The Blockchain Association and over 125 crypto industry participants sent a Dec. 18 letter to Congress opposing efforts to expand the GENIUS Act's prohibition on interest or yield. The letter stated claims that stablecoin rewards threaten community banks that lack supporting evidence.
The American Bankers Association published a separate letter the same day calling for strict enforcement of the ban on yield-bearing stablecoins. The association argued that allowing reward structures could undermine traditional banking activity and contradict the law's intent to maintain clear distinctions between payment tokens and deposit products.
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