Source: CryptoNewsNet Original Title: Coinbase CEO Defends China’s CBDC Interest Policy — But Why? Original Link: https://cryptonews.net/news/finance/32243082/

Armstrong’s Position on Stablecoin Rewards

Coinbase CEO Brian Armstrong recently praised China’s approach to its digital currency on social media, pointing to it as a model for US stablecoin policy. Armstrong’s defense of interest payments on digital assets comes as his company fights to preserve a key revenue stream under threat from traditional banking lobbies.

On January 8, Armstrong took to X to highlight China’s decision to pay interest on its digital currency. “China has decided to pay interest on its own stablecoin, because it benefits ordinary people, and they recognize it as a competitive advantage,” he wrote. “I worry we are missing the forest through the trees in the US.”

He argued that allowing rewards on stablecoins would benefit ordinary Americans without disrupting bank lending, and called for letting “the market do both.”

The Policy Context: The GENIUS Act

Armstrong’s comments come amid intense lobbying over US stablecoin regulation. The GENIUS Act, passed in July 2025, prohibited stablecoin issuers from paying interest directly to holders but allowed third-party platforms, such as exchanges, to share yields through “rewards” programs. This compromise favored platforms like Coinbase.

However, the banking industry has pushed back hard. In November, the American Bankers Association and 52 state banking associations sent a letter to the Treasury Department urging regulators to close this “loophole.” They argued that stablecoin platforms offering high-yield rewards could trigger deposit outflows, threatening up to $6.6 trillion in lending capacity.

On January 7, more than 200 community bank leaders sent another letter to the Senate asking lawmakers to extend the GENIUS Act’s interest prohibition to issuers’ affiliates and partners.

Armstrong responded forcefully on December 26, calling any attempt to reopen the GENIUS Act a “red line.” He criticized banks for earning roughly 4% on reserves parked at the Federal Reserve while paying depositors near zero, accusing them of “mental gymnastics” in framing yield restrictions as safety concerns.

Scrutinizing the China Comparison

Armstrong’s invocation of China appears designed to construct a competitive narrative: if China is doing it, why can’t America?

However, the comparison warrants scrutiny. A CBDC and a private stablecoin are fundamentally different instruments. The digital yuan is legal tender issued by China’s central bank, while stablecoins are dollar-pegged tokens from private companies. Analysts point out that China’s interest program reflects adoption struggles rather than competitive strength — the digital yuan previously offered no interest, while dominant mobile payment platforms offered returns, creating little incentive for users to switch.

The interest program that took effect January 1 is subsidized by commercial banks, not the central bank, and rates are likely below standard demand deposit rates.

The Broader Debate

Regardless of whether Armstrong’s China example holds up, his broader point — that yield-sharing benefits ordinary people and shouldn’t be restricted — may resonate in policy circles. The US debate ultimately centers on a different question: how much room private platforms should have to compete with banks for deposits.

The tension reflects a fundamental divide over the role of crypto platforms in the financial system and whether traditional banking regulations should apply to digital asset services.