Coinbase Sounds Alarm: China’s Crypto Strategy Poses Direct Threat to U.S. Sovereignty, Senate Told

Coinbase delivers a stark warning to U.S. lawmakers: America is losing the digital currency race, and China is poised to capitalize.

The Geopolitical Stakes Have Never Been Higher

Forget trade wars and tariffs—the next front in the U.S.-China rivalry is being built on blockchain. In a blunt briefing to the Senate, Coinbase framed China's aggressive development of a digital yuan and its broader crypto infrastructure not as mere innovation, but as a strategic weapon. The subtext was clear: control over the next generation of financial networks translates directly into global influence.

Playing a Different Rulebook

While U.S. regulators meticulously debate custody rules and securities law, China is executing a centralized, state-driven playbook. They're building a financial ecosystem that operates outside the dollar-dominated SWIFT system, potentially allowing them to bypass sanctions and set new standards for cross-border trade. It's a long-game strategy that views digital assets through the lens of national power—a perspective some in Washington still struggle to comprehend.

The Innovation Paradox

The warning highlights a painful irony. The very regulatory uncertainty that often stifles crypto innovation in the States is creating a vacuum. That vacuum is being filled by frameworks designed for control, not open competition. The risk isn't just falling behind technologically; it's ceding the architectural blueprint of future finance to a strategic competitor. After all, in high finance, the house always wins—especially when the house gets to write the rules for the new casino.

Coinbase's message cuts through the usual policy chatter: adapt and lead with clear rules, or watch from the sidelines as a rival shapes the financial system of the 21st century. The clock is ticking, and the market isn't waiting for committee approvals.

In brief

• China will offer interest on its digital yuan starting January 2026, a formidable strategy.
• Coinbase fears the US could lose ground if the GENIUS Act is weakened.
• Banks want to ban stablecoin rewards, citing stability but mostly defending their margins.
• The debate highlights the clash between crypto innovation and the inertia of the traditional financial system.

China: a digital yuan with interest starting in 2026

China is making a double move. Starting January 2026, digital wallets in e-CNY will yield interest. A discreet but strategic innovation. Vice Governor Lu Lei states:

The digital yuan will transition from the era of digital cash to that of digital deposit money. It will fulfill the functions of a unit of account, a store of value, and cross-border payment.

This change propels China to the front of the CBDC pack. Meanwhile, in the United States, the Senate is squabbling over the possibility of offering “rewards” to stablecoin users. 

Faryar Shirzad at Coinbase warns on X: “If this issue is mishandled during Senate negotiations on the Market Structure bill, it could provide valuable assistance to our global rivals by giving non-US stablecoins and central bank digital currencies a decisive competitive advantage, at the worst possible time.”

The crypto community fears that American stablecoins will become obsolete before even becoming widespread. Offering incentives is not trivial: it has become a tool of monetary sovereignty.

The silent battle: banks versus crypto 

The GENIUS Act seemed to have calmed things down. It bans stablecoin issuers from paying interest but allows platforms to offer rewards. Everyone had shaken hands. And yet…

Bank lobbies now want to reopen the text. Max Avery speaks bluntly: 

Basically, this is what happens: your bank takes your deposit, places it at the Federal Reserve, earns over 4% interest… and gives you almost nothing. A stablecoin platform wants to share some yield with you, and suddenly, that’s a threat to financial stability?

Coinbase does not intend to let this happen. For Brian Armstrong, any attempt to reopen the GENIUS Act WOULD cross a red line. According to him, banks are not trying to protect consumers but to preserve their rent, whatever it takes.

The stablecoin USDC becomes the banner of an ecosystem that no longer wants to be constrained. Behind the technical terms, it is a showdown over the sovereignty of digital currencies. And in that game, legislative inertia can be costly.

Crypto: America risks losing control

Beyond the United States, eyes are on the Senate. Fintechs, investors, developers watch: will American rules foster innovation or strangle it? If bank pressure wins, why choose America?

Faryar Shirzad sums up the issue: “tokenization is the future“. Yet, if the United States stifles its own stablecoin champions, its entire digital leadership falters. 

China moves forward: it pays, it deploys, it globalizes. It offers interest-bearing digital yuan where the West still doubts the use of stablecoins.

What if tomorrow the dollar lost its benchmark role? It is no longer a fantasy but a strategic question.

What the numbers say: an ongoing monetary war

• China will pay interest on e-CNY starting January 1, 2026;
• US banks earn 4.4% at the Fed;
• American savers receive 0.01% on average;
• The total stablecoin market exceeds $130 billion.

Beijing doesn’t stop there. On a completely different front, it now demands the immediate halt of US arms sales to Taiwan. When it comes to sovereignty, China does not blink. The crypto sphere would do well to remember this: sometimes, power does not shout. It advances.

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