Coinbase Says Stablecoin Interest Ban Gives China the Advantage

Core Viewpoint - Coinbase is warning that restrictions on stablecoin interest in the U.S. could inadvertently benefit China, especially as China prepares to allow interest on its digital currency starting early next year [1][4]. Group 1: Current Regulations and Responses - The GENIUS Act prohibits U.S. stablecoin issuers from paying interest directly to users, but some platforms are using workarounds to offer rewards without violating the law [2]. - Banking groups are advocating for regulators to eliminate these workaround options, arguing that they could destabilize traditional banking systems by diverting funds from banks [2][6]. Group 2: Innovation and Market Impact - Crypto firms argue that the push for stricter regulations goes beyond lawmakers' original intentions and could stifle innovation within the industry [3]. - If U.S. regulators enforce a ban on yield from stablecoins, it may lead to a decrease in competitiveness for U.S. stablecoins, particularly as other countries, like China, offer more attractive digital currency options [8]. Group 3: Global Implications - Coinbase's policy team warns that tightening rules around stablecoin rewards could drive users and businesses to seek alternatives, potentially diminishing the global appeal of dollar-backed tokens [4][5]. - The anticipated interest on China's digital yuan could make it a more appealing option for both transactions and long-term investments compared to U.S. stablecoins that do not offer yields [5].