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China’s decision to pay interest on its digital yuan sharpens the global race for digital money, raising fears that stalled U.S. policy could weaken stablecoins, payments dominance, and competitiveness as incentives reshape adoption and cross-border finance.
China’s Digital Yuan Strategy Raises Alarm Over US Stablecoin Policy
China is pulling ahead in digital money as U.S. policy stalls. Coinbase CEO Brian Armstrong shared on social media platform X on Jan. 7 that China’s move to pay interest on digital currency risks sidelining U.S. stablecoins in the global competition.
“China has decided to pay interest on their own stablecoin, because it benefits ordinary people, and they recognize it as a competitive advantage,” the Coinbase chief explained, cautioning:
I worry we are missing the forest through the trees in the U.S. Rewards on stablecoins will not change lending one bit – but it does have a big impact on whether U.S. stablecoins are competitive.
Armstrong framed the issue as a strategic warning rather than a narrow regulatory dispute, emphasizing that incentives embedded in digital currencies influence adoption, liquidity, and international relevance. He cautioned that U.S. debates focused on whether rewards resemble lending activity risk overlooking broader competitive dynamics shaping global payment systems. The executive underscored that reward-bearing digital assets allow users to earn on idle balances, a feature he positioned as increasingly decisive in cross-border payments, settlement, and everyday usage.
Read more: Stablecoin Rewards Under Fire With Coinbase Accusing Banks of Bailout Play
Armstrong further mentioned:
Rewards (or even paying interest) benefits ordinary people just like community lending does. We have to let the market do both.
He referenced reports that China will begin paying interest on its official digital currency, the digital yuan, starting Jan. 1. Commercial banks operating digital yuan wallets will credit users based on balances held, a step that grants the E-CNY the same legal status as deposits at commercial banks and reshapes its technical framework. The initiative follows years of pilot programs that have processed trillions of yuan in transactions, even as adoption has lagged behind Wechat Pay and Alipay, reinforcing concerns that incentives may determine which digital currencies achieve scale.
FAQ ⏰
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Why is China paying interest on the digital yuan?
China aims to boost adoption and competitiveness by rewarding users who hold balances in the digital yuan. -
What warning did Coinbase CEO Brian Armstrong issue?
He said U.S. stablecoins risk falling behind globally if they cannot offer rewards or interest. -
How could interest-bearing digital currency affect global payments?
Incentives can drive liquidity, usage, and dominance in cross-border payments and settlements. -
Why does U.S. policy matter in the stablecoin race?
Regulatory hesitation may limit innovation and weaken U.S. influence in digital money markets.