China’s central bank made the e-CNY interest-bearing effective January 1, 2026, shifting it from cash-like money to something closer to a digital deposit. That design choice increases competitive pressure on U.S. stablecoin policy, because it introduces a state-backed, yield-bearing alternative to both bank deposits and dollar-backed stablecoins.
The policy contrast is now hard to ignore: Beijing is using yield to accelerate adoption, while Washington’s GENIUS Act largely blocks stablecoin issuers from paying interest. With those two regimes moving in opposite directions, market participants are left balancing adoption incentives against financial-stability guardrails.
Why an interest-bearing e-CNY changes the playing field
China’s redesign reframes the e-CNY as a “digital deposit currency” by attaching interest to holdings. The stated intent is to boost domestic usage, compete more effectively with private payment platforms, and support cross-border use of the yuan.
Because the system is centrally controlled and state-backed, it can offer yield without the same prudential trade-offs faced by market-based issuers. That creates a structural advantage: users and cross-border partners can earn a return on official digital money that U.S. dollar stablecoins, under current U.S. law, are largely prevented from matching.
How the GENIUS Act shapes U.S. stablecoin economics
The GENIUS Act, enacted in July 2025, bans stablecoin issuers from directly paying interest or yield to token holders. Banking groups argued for this restriction on the basis of deposit flight and financial stability, and industry lobbying has pushed for broad enforcement that could extend the same limits to intermediaries such as exchanges.
Crypto firms, led by Coinbase, argue that an overly expansive interpretation would stifle innovation and weaken U.S. competitiveness. Coinbase Chief Policy Officer Faryar Shirzad warned that “the U.S. risks ceding competitive ground to China’s digital yuan” if the rewards issue is handled too restrictively, framing the dispute as strategic rather than purely commercial.
In operational terms, the gap between a yield-bearing e-CNY and yield-restricted stablecoins can reshape flows, product design, and compliance burdens. Yield on e-CNY could pull balances toward yuan-linked instruments, while U.S. firms may look to workarounds like third-party rewards or token wrappers (or pursue legal challenges), and tougher enforcement would increase costs for exchanges and wallet providers—ultimately turning stablecoin rules into a lever in geopolitical currency competition.
The next milestone is how U.S. regulators interpret and apply the yield ban now that the e-CNY interest regime is already live. Investors and product teams will be watching whether enforcement stays narrow or expands to intermediaries, and whether courts or Congress revisit the statute’s scope as competitive pressure intensifies.