The rivalry for the money of choice in the 21st century is heating up. Now that the regulatory stalemate in the U.S. over whether exchanges should reward stablecoin users is nearing a resolution, China may promote its digital yuan in emerging markets that are most likely to get dollarized.
Last year’s Genius Act, the law under which the private sector will offer 1:1 representations of the dollar, prohibits stablecoins from sharing with customers the income earned by their issuers on assets backing the tokens. But banks also wanted a total ban on third-party rewards to prevent a flight of deposits, while crypto firms argued such a move would kill innovation. It looks like a way out of the impasse has been found.
The stakes are high. Last year, Coinbase Global, the No. 1 U.S. crypto exchange, earned nearly a fifth of its revenue, or $1.35 billion, from stablecoins. Most of it came from its partnership with Circle Internet, with Coinbase paying out hundreds of millions in rewards to customers who use Circle’s USDC tokens. These are small numbers, but once the dollar clones are regulated, their usage is expected to explode.
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