Stablecoin Yield Debate Intensifies as Coinbase Pushes Back Against Regulatory Limits

• Coinbase is warning about how strict US rules on stablecoin rewards might hurt the way US digital dollars look on the world stage. 
• Since China is pushing ahead with interest-bearing options for its digital yuan.

This follows a warning from the company, Coinbase, that any limitation on interest rates or reward schemes in relation to stablecoins in the United States could have the effect of giving China an advantage in the global competition in digital finance. This decision comes at a time when there are debates among the U.S. regulators about the application of the GENIUS Act.

Regulatory Interpretation Sparks Competitiveness Worries

The GENIUS Act, which became effective in the middle of 2025, makes it difficult to engage in stablecoins with loads of regulations. It is, however, still unclear if it applies to rewards or incentive programs being used by non-issuer platforms, such as cryptocurrency exchanges and payment companies. While Faryar Shirzad, the Chief Policy Officer of Coinbase, suggests that making it applicable would exceed the legislative intent, it would help allow U.S. stablecoins to be used in digital finance payment systems.

As per the explanation offered by Coinbase, the incentives that come from the non-issuers are generally common for financial services and have a different structure from the interest paid on the issuer side. The company has been advising the regulators to enforce the law as per the words of the statute to avoid limiting the utility of stablecoins.

China’s Digital Yuan Highlights Global Contrast

The issue has also been brought to the attention of Coinbase by developments being witnessed in China. Despite the warnings from banking associations in the U.S. that the incentives provided by stablecoins could work to withdraw deposits from banks, the need to restrict such incentives may end up making the U.S. version of digital dollars non-competitive. The increased usage of stablecoins in cross-border payment transactions, managing the treasury, or on-chain transactions cannot ignore the element of incentives.

Conclusion

While banking groups in the U.S. had warned that stablecoin rewards could siphon deposits from traditional banks, industry players in the crypto space also say that placing limits on such mechanisms may weaken the competitiveness of U.S.-regulated digital dollars. Stablecoins are increasingly being used in cross-border payments, treasury operations, and on-chain settlement, which are aspects where economic incentives often come into play. The result will help define what place US stablecoins will have in global digital finance and whether foreign digital currencies, including China’s interest-bearing e-CNY, will enjoy a structural advantage in an emerging payments environment.

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