SS #62 - The Great Stablecoin Yield Gap and the Rise of China’s Digital Yuan

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Good morning!

Happy New Year to all our loyal Stablescope readers! Let’s step into 2026 with renewed energy! To kick off the year, we’re looking at a major shift in the digital currency landscape. Coinbase’s Chief Policy Officer has issued a warning regarding the GENIUS Act, noting that strict U.S. restrictions on stablecoin rewards could hand a strategic advantage to China. As the digital yuan (e-CNY) begins offering interest to users, the race for global financial dominance is entering a critical new phase.

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In Today's Edition:

• Headline: The Great Stablecoin Yield Gap and the Rise of China’s Digital Yuan

• Quick Bites: Tether Adds Nearly $800M in BTC

• Yield of the Week: 25.24% APY on Drift

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HEADLINE

The Great Stablecoin Yield Gap and the Rise of China’s Digital Yuan

State of play: Coinbase’s Chief Policy Officer has warned that U.S. restrictions on stablecoin rewards, mandated by the GENIUS Act, risk ceding global financial dominance to China as the digital yuan (e-CNY) begins offering interest to users.

• China is transitioning the e-CNY from "digital cash" to "digital deposit currency," allowing banks to pay interest to drive adoption.

• U.S. law currently prohibits stablecoin issuers from paying direct interest, a rule crypto firms argue handicaps the U.S. dollar in the digital age.

• A legislative battle is peaking between the crypto industry, which seeks reward flexibility, and the banking lobby, which fears a drain on traditional deposits.

What’s Next: Expect intense lobbying as the Senate negotiates the market structure bill; crypto advocates will push for "rewards" or "incentives" to be legally distinguished from "interest" to remain competitive without violating the GENIUS Act.

Why it Matters: This isn't just a regulatory tiff; it’s a matter of dollar primacy. If global users can earn yield on a Chinese CBDC or offshore stablecoins but not on regulated U.S. versions, the dollar’s status as the world's primary settlement instrument could erode.

Our Take: The U.S. is at a crossroads: protect the business model of traditional banks or protect the global relevance of the dollar. We believe the "no-yield" stance is a strategic error; to win the digital currency war, U.S. stablecoins must offer a superior value proposition to the e-CNY.

QUICK BITES

• Tether adds nearly $800M in BTC.

• South Korea's stablecoin bill stalls over issuer eligibility dispute.

YIELD OF THE WEEK

Drift JLP Delta Neutral V5: 25.24% APY

• The vault uses leverage to capture trading and liquidation fees from the Jupiter Perps DEX while using a delta-neutral approach to hedge against the price fluctuations of the underlying JLP token.

• Investors are charged a 25% performance fee on any profits generated, with no annual management fee, to align the provider's incentives with the vault's success.

• There is a 24-hour redemption period for all withdrawals, during which any additional profits earned are forfeited and manual adjustments may be made to ensure the process remains orderly.

Jupiter syrupUSDC/USDC: 5.6%-12.37% APY

• Users on Jupiter can utilize syrupUSDC as collateral to borrow USDC with leverage reaching up to 8.32x, a feature designed to amplify potential returns on stablecoin positions.

• The protocol operates with a maximum Loan-to-Value (LTV) ratio of 88%, meaning users can borrow up to that percentage of their collateral's total value.

• A liquidation is triggered if the LTV reaches the 90% threshold; in such an event, a 1% penalty is applied to the position to cover the costs of the forced closure.

Dolomite Looped srUSD: 7.92%-40.67% APY

• This approach involves using srUSD as collateral to borrow other stablecoins, which are then swapped back into more srUSD to repeat the cycle, effectively "looping" the position to amplify exposure.

• The strategy is considered delta-neutral because both the collateral used and the debt incurred are tied to the value of the US Dollar, minimizing the risk of price fluctuations between the assets.

• Returns are primarily generated through the appreciation of srUSD, with users having the flexibility to choose from three specific debt assets: USD1, USDC, or USDT.

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Disclaimer: All the information presented in this publication and its affiliates is strictly for educational purposes only. It should not be construed or taken as financial, legal, investment, or any other form of advice.