Stablecoin rewards have become a national security issue as U.S. crypto leaders counter banks’ push to ban them, citing China’s plan to offer yield on its digital yuan e-CNY from January 1, 2025, to boost adoption and challenge USD dominance.
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Banks through the Bank Policy Institute seek to restrict stablecoin rewards to prevent deposit flight and credit reduction.
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Crypto advocates like Coinbase CEO Brian Armstrong argue rewards keep U.S. stablecoins competitive globally against low bank interest rates under 1%.
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Stablecoin market cap surged from $254 billion to $307 billion post-GENIUS Act, with yield-bearing assets like BlackRock’s BUIDL doubling to over $12 billion in 2025.
Stablecoin rewards spark national security debate amid China’s digital yuan yield. Crypto vs banks battle heats up—explore impacts on USD dominance and adoption. Read now for key insights. (158 characters)
Why are stablecoin rewards a national security issue?
Stablecoin rewards are increasingly viewed as critical for U.S. financial leadership. Coinbase CEO Brian Armstrong stated, “U.S. stablecoins must remain competitive on a global stage.” China’s decision to enable interest on digital yuan wallets from January 1, 2025, per a Bloomberg report, has prompted crypto executives to warn that banning rewards could undermine the GENIUS Act’s gains in USD hegemony.
What triggered the renewed defense of stablecoin rewards?
Traditional banks, represented by the Bank Policy Institute (BPI), have lobbied since August to amend the GENIUS Act or the crypto market structure bill to prohibit yield on stablecoins. They argue it risks capital flight from deposits, impairing lending to small businesses. BPI cautioned lawmakers: “Any level of stablecoin adoption will likely cause displacements in bank deposits and reduction of credit.” Crypto countered that stablecoins offer over 3% yields versus banks’ under 1%, and usage is higher abroad. Jake Chervinsky, CLO at Variant Fund, elevated the debate: “It’s a matter of national security. Revisiting stablecoin rewards would hand that win to China.” Coinbase’s Faryar Shirzad added that mishandling this in Senate talks could advantage non-U.S. stablecoins and CBDCs.
Source: X
These arguments underscore a broader clash: banks view stablecoins as disruptive, while proponents see yield as essential for innovation and global edge. Data shows Coinbase pays interest on USDC, PayPal on PYUSD, driving adoption. DeFi yield-bearers like Maple’s sUSDS and BlackRock’s BUIDL doubled from $6 billion to over $12 billion in 2025, per StableWatch data.
Source: StableWatch
Frequently Asked Questions
What is the GENIUS Act and its role in stablecoin rewards?
The GENIUS Act, passed in July 2025, bolstered USD stablecoin frameworks, spurring market growth from $254 billion to $307 billion. It supports innovations like yield-bearing stablecoins but faces bank-led challenges to restrict rewards, which crypto sees as vital for competitiveness.
How does China’s digital yuan yield affect U.S. stablecoins?
China’s commercial banks will pay interest on e-CNY wallets starting January 1, 2025, to accelerate adoption. This prompts U.S. advocates to defend stablecoin rewards, warning that restrictions could empower China’s CBDC and erode dollar dominance in global payments.
Key Takeaways
- National Security Framing: Crypto leaders like Chervinsky position stablecoin rewards as essential to counter China’s e-CNY yield.
- Banks’ Concerns: BPI highlights risks of deposit shifts reducing credit availability for businesses.
- Market Momentum: Yield-bearing stablecoins grew significantly, signaling strong demand—act now to understand policy impacts.
Conclusion
The debate over stablecoin rewards pits U.S. crypto innovation against banking interests, amplified by China’s digital yuan yield strategy. With market expansion evident post-GENIUS Act, policymakers must balance competition and stability. Monitor Senate negotiations to gauge implications for global finance.
