stablecoin market capitalization grew 49% in 2025, reaching $306 billion by November's end. This expansion highlights their pivotal role in cross-border payments and decentralized finance. 's chief policy officer urges lawmakers to avoid limiting yields, lest competitors like China gain an upper hand.
Understanding the GENIUS Act
The GENIUS Act, enacted in July 2025, establishes a federal framework for payment stablecoins. It prohibits issuers from directly paying interest to holders, aiming to focus on transactional utility.
According to Treasury reports, this law promotes uniformity but may hinder innovation if overly restrictive. Regulators coordinate with states to enforce rules on permitted issuers.
Coinbase's Warning on Global Competition
Faryar Shirzad, Coinbase's policy chief, stated that tokenization represents the future of finance. He emphasized the Act's role in positioning US dollar stablecoins as key settlement tools.
Shirzad cautioned that mishandling yield provisions in Senate talks could assist rivals. Non-US stablecoins and CBDCs might then dominate, he noted.
China's Digital Yuan Advancements
China's central bank will enable interest on e-CNY holdings starting January 2026. This shifts the digital yuan from cash equivalent to deposit-like currency, per PBOC deputy governor Lu Lei.
Such moves aim to boost adoption amid sluggish consumer uptake. Analysts from Atlantic Council observe China's push to counter USD stablecoin dominance, which holds 99% market share.
Impact on Cefi and DeFi Ecosystems
In centralized finance, platforms like Coinbase face constraints on offering competitive yields. This could drive users to offshore cefi options, reducing US oversight.
Decentralized finance relies on stablecoins for liquidity in protocols. Yield restrictions might slow DeFi growth, as per Chainalysis data showing $703 billion monthly USDT volume.
Broader Trends in stablecoin Markets
stablecoin usage surged 50% in US crypto activity through July 2025, TRM Labs reports. Ethereum hosts over half the liquidity, fueling and applications.
China explores yuan-backed stablecoins to enhance global currency usage, Reuters sources indicate. This challenges US-led trends in digital assets.
Regulatory Debates and Industry Pushback
The Blockchain Association, with over 125 firms, urged Congress to reject broad yield bans. They argue claims of threats to community banks lack evidence.
Conversely, the American Bankers Association advocates strict enforcement. They contend crypto incentives undermine traditional banking, as outlined in their December letter.
Web3 Implications and Future Outlook
innovations depend on seamless stablecoin integration for tokenization. US policies must balance security with competitiveness to lead in this space.
Experts from Lowy Institute describe a Sino-US rivalry in stablecoins reshaping global finance. Coordinated regulations could mitigate risks while fostering growth.
This debate highlights the urgency for thoughtful policymaking in crypto. Balanced approaches will preserve US influence in cefi, DeFi, and , ensuring economic advantages amid international competition.
