On Jan. 1, 2026, China made its digital yuan interest-bearing. Fourteen days later, the U.S. Senate postponed a critical vote on whether digital dollars can pay interest, too.
This American hesitation feints at unilateral financial disarmament. China is weaponizing its currency to attract global capital while the U.S. is captured by its capitalists.
Wall Street paralyzed the Senate over a simple question: Should digital dollar holders earn interest? Big banks say no because yield-bearing digital dollars compete with bank deposits. If customers can earn real returns by holding stablecoins, they stop parking money in bank accounts that pay almost nothing. Banks lose their cheapest source of funding. So banks want Congress to add Section 404 to the CLARITY Act and ban anyone from paying interest to stablecoin users, thus preserving the banking monopoly on low-cost deposits.
Section 404 doesn’t just transfer wealth from ordinary Americans to the big banks. It also breaks the basis for crypto dollars driving global finance.
Last July, Congress passed the GENIUS Act, a law that quietly transformed the plumbing of the dollar system. The statute requires payment stablecoin issuers to back every token one-for-one with cash or U.S. Treasury bills.
This unglamorous requirement is a geopolitical force multiplier: it converts global demand for digital dollars into structural demand for American government debt. Tether alone now owns roughly $135 billion in Treasuries, meaning this crypto company holds more U.S. debt than Germany or South Korea. Collectively, stablecoin issuers have become the 16th-largest holder of U.S. debt worldwide.
The GENIUS Act bans issuers from paying interest directly. Circle cannot pay you to hold USDC. But third-party platforms like Coinbase and Gemini can and do offer rewards of 3.5% or more, effectively sharing their Treasury earnings with users. That revenue-sharing mechanism is the main thing keeping digital dollars competitive with Beijing’s new interest-bearing yuan.
Banks want to avoid competing with Coinbase by banning its business model.
Section 404 of the pending CLARITY Act would extend the interest ban from issuers to platforms. If it passes, no one in the American financial system—not Circle, not Coinbase, not anyone—could pay you for holding stablecoins. The crypto machine Congress built to finance American debt would lose the incentive that makes most people want to use it.
The banks frame this as consumer protection. JPMorgan’s CFO Jeremy Barnum nakedly claims that stablecoin yield is “obviously dangerous.” Dangerous for whom? JPM executives? Wells Fargo shareholders? Barnum failed to explain how his market power protects consumers.
Meanwhile, Bank of America’s CEO Brian Moynihan warns that yield-bearing stablecoins could siphon $6.6 trillion in deposits from traditional banks. Moynihan’ dismay over “deposit displacement” assumes stablecoin users have deposits to displace. But many do not.
According to the FDIC, about 11 percent of Black households and 9 percent of Hispanic households are unbanked. Crypto adoption runs higher in these communities than the general population. Coinbase isn’t just poaching Ohio savings accounts where banks offer a meager 0.1 percent interest. New users include people the traditional banking system never served, people who now earn orders of magnitude more on platforms that banks want Congress to shut down.
For a family in Finland or a contractor in Colombia, there is no American deposit to protect. There is only a choice: hold a dollar-backed stablecoin that pays nothing or hold a digital yuan that pays interest. If Congress bans the only mechanism that lets digital dollars compete, it hands international customers to China.
Coinbase told the Senate that Section 404 makes CLARITY a murky mess when it withdrew support for the proposed law: “We’d rather have no bill than a bad bill.” Support for the markup collapsed within 24 hours. Meanwhile, China’s digital yuan kept paying interest.
The strategic brilliance of the GENIUS Act was co-opting crypto to finance American debt. The tragedy unfolding now is that Congress may regulate that advantage out of existence because big banks want a government-enforced monopoly on low-yield deposits.
Capital is mercenary. It has no fixed flag. Capital follows yield.
If dollar-backed stablecoins cannot pay interest while the digital yuan can, then money goes to Beijing, where the Communist Party of China dictates the financial infrastructure of the next century.
