Tightening U.S. Stablecoin Rules Could Hand Advantage to China's Digital Yuan—Here's Why

The global digital asset landscape is witnessing a shifting power dynamic. As U.S. policymakers consider stricter stablecoin regulations, a critical question emerges: could overly restrictive rules inadvertently strengthen China’s hand in the race for digital currency dominance?

Coinbase’s leadership recently highlighted this concern, pointing out that stringent stablecoin oversight risks eroding American technological leadership in the digital asset space. The argument carries weight when you examine the adoption trajectory of China’s digital yuan on the other side of the equation.

China’s Digital Yuan Is Already Scaling

The numbers tell a compelling story. By November 2025, China’s digital yuan has already processed 3.48 billion transactions—a staggering figure that demonstrates real-world utility and market penetration. Even more notably, starting from 2026, the digital yuan will offer interest-bearing features, making it increasingly attractive to both institutional and retail users.

The scale becomes clearer when contextualizing these figures: 3.48 billion transactions represent substantial value transfer, potentially equivalent to billions in USD terms (for perspective, moving $300,000 yuan to USD would underscore the volume at individual transaction levels). The aggregate impact across billions of transactions positions China’s digital currency as a formidable player in reshaping global payments infrastructure.

Cross-Border Payments: The mBridge Effect

The mBridge initiative—a multi-country digital currency bridge project—has further accelerated this shift. The platform has already facilitated $55.34 billion in cross-border payments, with an impressive 95.3% of these transactions conducted entirely in digital currencies rather than traditional fiat intermediaries.

This statistic underscores a critical inflection point: digital currencies are no longer theoretical. They’re actively displacing traditional correspondent banking channels for international settlements.

The Policy Dilemma

The tension between regulation and innovation is mounting. Heavy-handed stablecoin restrictions in the U.S. could accelerate capital and talent migration toward jurisdictions with more accommodating frameworks—and potentially toward China’s state-backed digital solutions.

Coinbase’s message to legislators is clear: balanced regulation, not restrictive enforcement, is the path forward. The alternative may be ceding ground in what increasingly resembles a strategic competition for digital financial infrastructure supremacy.

The window for recalibrating U.S. policy remains open—but only for now.