China Pays Interest on Stablecoins While US Debates, Coinbase Warns—Is America Handing Crypto Dominance Away?

Source: CryptoNewsNet Original Title: China Pays Interest on Stablecoins While US Debates, Coinbase Warns—Is America Handing Crypto Dominance Away? Original Link: https://cryptonews.net/news/finance/32242956/ China is pulling ahead in the global digital money race as U.S. policy stalls. According to a recent statement, China’s move to pay interest on its digital currency risks sidelining U.S. stablecoins in international competition.

The Strategic Warning

The concern centers on a fundamental competitive disadvantage: China has decided to pay interest on its official digital currency, recognizing this as a strategic advantage. This move incentivizes adoption by rewarding users who hold balances, a feature that could prove decisive in cross-border payments, settlement, and everyday usage.

Industry observers warn that U.S. regulatory debates focused narrowly on whether stablecoin rewards resemble lending activity risk overlooking broader competitive dynamics. The real issue isn’t regulatory classification—it’s whether U.S. stablecoins can compete globally when reward-bearing digital assets allow users to earn on idle balances.

China’s Digital Yuan Initiative

China’s new policy involves paying interest on the digital yuan (E-CNY) starting January 1st. Commercial banks operating digital yuan wallets will credit users based on balances held, granting the digital yuan the same legal status as deposits at commercial banks. This represents a significant technical and strategic evolution.

The initiative follows years of pilot programs that have processed trillions of yuan in transactions, though adoption has lagged behind dominant mobile payment platforms like WeChat Pay and Alipay. Incentives, it appears, may determine which digital currencies achieve scale.

Why This Matters

Adoption and Liquidity: Interest-bearing digital currencies create powerful incentives for user adoption and balance retention, directly influencing liquidity and trading volumes.

Cross-Border Competitiveness: Reward mechanisms influence international relevance and the role of digital currencies in global payment systems.

Market Dynamics: Allowing reward-bearing assets benefits ordinary users just as community lending does—the market should accommodate innovation rather than restrict it.

The broader implication is clear: U.S. hesitation on stablecoin policy risks weakening American influence in digital money markets at a critical moment when global payment infrastructure is being reshaped.