Coinbase Warns: US "Rewards" Ban Could Hand China the Stablecoin Crown

American crypto giant sounds the alarm—regulatory overreach might just gift-wrap the future of finance for Beijing.

The Innovation Chokehold

Coinbase argues that proposed U.S. restrictions on crypto rewards programs don't protect consumers; they stifle domestic innovation. The rules target a key mechanism for user adoption and engagement, putting American firms at a direct disadvantage. It's classic regulatory myopia—focusing on the perceived risk of a new feature while ignoring the strategic cost of killing it.

The Geopolitical Gift

While U.S. regulators tie their own industry's hands, China is charging full-speed ahead with its digital currency ambitions. Their state-backed digital yuan and associated stablecoin frameworks face no such internal friction. The race for stablecoin dominance isn't just about technology—it's about who sets the rules for the next generation of global capital flows. Handicapping your own team is a surefire way to lose.

The Finance Jab

Wall Street would never accept a ban on loyalty points or credit card miles—they'd call it 'anti-competitive' and lobby it into oblivion. But when it's crypto? Suddenly, consumer protection is the rallying cry. Funny how that works.

The warning is clear: over-regulate in the name of safety, and you might just secure a very different future—one where the digital dollar plays second fiddle to a currency whose monetary policy is set in Beijing. The ultimate reward for getting it wrong.

He said the issue is especially sensitive as rival systems MOVE to make their digital currencies more competitive.

Shirzad pointed directly to China’s latest moves on its central bank digital currency, the digital yuan, as an example of how fast the global environment is changing.

As China Sweetens Digital Yuan, Coinbase Questions U.S. Stablecoin Limits

Earlier this week, the People’s Bank of China unveiled a framework that will allow commercial banks to pay interest on balances held in digital yuan wallets starting January 1, 2026.

China's PBOC has rolled out digital yuan action plan for the upcoming year, to enhance the CBDC's management and financial infrastructure. #PBOC #DigitalYuan #ChinaCBDChttps://t.co/sKEBAfgcve

Lu Lei, a deputy governor at the PBOC, said the change WOULD shift the e-CNY beyond its original role as a digital version of cash and integrate it into banks’ asset and liability operations.

In the United States, the discussion is unfolding against the backdrop of the GENIUS Act, signed into law in July as the country’s first comprehensive stablecoin framework.

A provision in GENIUS Act aims to curb the influence of tech conglomerates and major financial institutions in the US stablecoin market.#GENIUS #Stablecoinshttps://t.co/IE7FZdWjXw

The legislation set reserve and compliance standards for issuers and barred them from paying direct interest while still allowing platforms and third parties to offer rewards tied to stablecoin usage.

Shirzad warned that changes during Senate negotiations on a broader market structure bill could tip the balance further, potentially giving non-US stablecoins and CBDCs a competitive edge.

Industry observers say pressure to revisit the law is coming from traditional banking interests.

Crypto policy commentator Max Avery said banks, which currently earn roughly 4% on reserves held at the Federal Reserve, have little incentive to see that yield shared more widely.

Stablecoin platforms, by contrast, have argued that passing some of that return to users through rewards is part of what makes the products attractive.

China Pushes More on Digital Yuan Growth as Private Apps Still Dominate

China continues to develop its CBDC despite banning cryptocurrency trading and stablecoins domestically. Its latest action plan, covering 2026 to 2030, seeks to expand national usage of the digital yuan and build out supporting infrastructure.

By November 2025, the e-CNY had processed 3.48 billion transactions worth 16.7 trillion yuan, or about $2.34 trillion, across 230 million personal wallets and nearly 19 million corporate wallets.

The introduction of interest-bearing digital yuan wallets is widely seen as an attempt to address long-standing complaints.

Adoption has lagged behind private payment platforms such as Alipay and WeChat Pay, which together control more than 90% of China’s mobile payments market.

Users have cited a lack of incentives and ongoing privacy concerns as reasons for sticking with existing apps, despite years of pilot programs.

The policy has already triggered a surge in market activity, with Chinese investors pouring more than $188 million into digital yuan-related stocks following the announcement.

Chinese investors inject $188 million into digital yuan stocks after PBOC announces interest-bearing CBDC wallets starting January 2026.#China #CBDChttps://t.co/mhze2uEyHn

At the same time, authorities have issued warnings about scams exploiting the new interest feature, highlighting the trust issues the system still faces.

Notably, the U.S. has taken a markedly different approach. In January, President Donald TRUMP signed an executive order barring federal agencies from issuing or supporting a central bank digital currency.

The administration cited risks to financial stability, personal privacy, and national sovereignty while showing support for privately issued, regulated stablecoins as the preferred digital dollar model.