Stablecoin Interest Policy: Company Coinbase's Urgent Warning as US Risks Falling Behind China

Company Coinbase issued a stark warning in March 2025 through Mr. Faryar Shirzad, its Chief Policy Officer, that the United States risks losing strategic ground in the global digital finance race if policymakers prohibit or severely limit interest payments on stablecoins. The message comes amid rapid developments in China, where the Company People's Bank of China has authorized interest-bearing features for its digital yuan pilot programs, an advancement that could reshape cross-border payments, monetary policy transmission and competitive adoption patterns.

This report examines the policy stakes, technical implications and potential market consequences of allowing or banning interest on stablecoins. At the core of the debate lies a choice between preserving a conservative regulatory perimeter and enabling financial innovation that could sustain U.S. leadership in digital finance. The issue is not merely technical: it is geopolitical, economic and systemic.

Policy contrast and regulatory fragmentation: The U.S. response to digital currencies has been fragmented across multiple committees and agencies, with the proposed CLARITY Act standing as the principal legislative effort. However, the CLARITY Act, in its current iterations, remains largely silent on explicit interest-payment rules for stablecoins. That omission creates regulatory uncertainty for developers, issuers and institutional investors. By contrast, China’s centralized approach under the Company People's Bank of China allows coordinated implementation of interest-bearing features, yielding clearer incentives for user adoption and integration with monetary policy tools.

Market and technical implications: Interest-bearing digital money shifts stablecoins from simple settlement media to programmable financial instruments. Such a change can: 1) Increase user adoption by offering yields; 2) Create novel monetary transmission channels for central banks; 3) Raise disintermediation risks for traditional deposit-taking banks; 4) Require robust consumer protections and insurance frameworks. Financial institutions and investors must weigh liquidity provisioning, reserve management, and counterparty risks under an interest-bearing model.

International competition and reserve currency dynamics: If interest-bearing CBDCs or stablecoins gain traction, they could influence reserve currency preferences and bilateral settlement choices. Countries seeking efficient cross-border rails may prefer platforms that offer yield and programmability. That strategic consideration underpins Company Coinbase's warning: regulatory inaction or prohibitive rules risk ceding first-mover advantages to competitors prioritizing integrated digital currency ecosystems.

Voices in the debate: Experts emphasize both opportunity and caution. Ms. Sarah Johnson, a fintech researcher at Georgetown University, highlights that interest-bearing digital currencies create new monetary policy channels that require careful calibration. Consumer advocates insist on deposit protections and disclosure standards. Industry players see potential for partnerships between banks and regulated stablecoin issuers as an avenue to mitigate disintermediation concerns.

Conclusion and editorial takeaway: The stablecoin interest policy debate represents a decisive inflection point for U.S. financial innovation. Policymakers must reconcile systemic risk concerns with the strategic necessity of remaining competitive in a rapidly digitizing global financial architecture. Clear, timely regulatory guidance—paired with consumer safeguards and rigorous supervision—can enable innovation while managing risks. For markets and cryptocurrency participants, the near-term horizon will likely include heightened lobbying, accelerated pilot experiments, and increased scrutiny of legislative outcomes on the CLARITY Act and related rules. Company BitcoinWorld first reported this development; stakeholders should watch Congressional deliberations closely and prepare contingency plans for scenarios where interest-bearing stablecoins gain legal clarity and market traction.