Will the GENIUS Act Kill DeFi and Stablecoin Yield?
The post Will the GENIUS Act Kill DeFi and Stablecoin Yield? appeared on BitcoinEthereumNews.com. While the GENIUS Act offers clear benefits, such as expanding global access to the US dollar through stablecoins, some of its restrictions paradoxically create new avenues for growth in other areas of the crypto industry. Specifically, the Act prohibits stablecoin issuers from paying interest to stablecoin holders. This limitation creates problems for institutions and sophisticated investors constantly seeking yield-bearing opportunities. Luckily for them, decentralized finance (DeFi) offers a vast array of mechanisms that can generate returns. As the GENIUS Act begins to take off, it might also solidify DeFi’s role in the market. Will the GENIUS Act Redirect Capital to DeFi? Officially signed into law, the GENIUS Act is already seeing the proliferation of the stablecoin market worldwide. Now that the United States backs the use of these digital assets with a comprehensive framework that provides sufficient consumer protection and financial stability, adoption is set to skyrocket. Interestingly, the legislation’s restrictions, particularly its ban on yield-bearing stablecoins, could stimulate activity in other areas of the crypto sector. While issuers hold interest-earning reserves like Treasury bills to back stablecoins, this interest cannot be passed on to holders. The GENIUS Act isn’t directly about DeFi — it regulates centralized stablecoins with full reserves offchain. But it is very good for DeFi — the more dollars and people there are onchain, the more need there will be for onchain finance of all kinds. Payments are just a gateway. — Jake Chervinsky (@jchervinsky) July 18, 2025 This provision creates a notable challenge for institutions and sophisticated investors, who are often obligated by fiduciary duties to seek returns on their capital. With regulated stablecoins unable to offer passive income, these substantial pools of institutional funds may be directed toward alternative avenues for generating returns. Such a scenario allows decentralized finance to become a viable solution…
The post Will the GENIUS Act Kill DeFi and Stablecoin Yield? appeared on BitcoinEthereumNews.com.
While the GENIUS Act offers clear benefits, such as expanding global access to the US dollar through stablecoins, some of its restrictions paradoxically create new avenues for growth in other areas of the crypto industry. Specifically, the Act prohibits stablecoin issuers from paying interest to stablecoin holders. This limitation creates problems for institutions and sophisticated investors constantly seeking yield-bearing opportunities. Luckily for them, decentralized finance (DeFi) offers a vast array of mechanisms that can generate returns. As the GENIUS Act begins to take off, it might also solidify DeFi’s role in the market. Will the GENIUS Act Redirect Capital to DeFi? Officially signed into law, the GENIUS Act is already seeing the proliferation of the stablecoin market worldwide. Now that the United States backs the use of these digital assets with a comprehensive framework that provides sufficient consumer protection and financial stability, adoption is set to skyrocket. Interestingly, the legislation’s restrictions, particularly its ban on yield-bearing stablecoins, could stimulate activity in other areas of the crypto sector. While issuers hold interest-earning reserves like Treasury bills to back stablecoins, this interest cannot be passed on to holders. The GENIUS Act isn’t directly about DeFi — it regulates centralized stablecoins with full reserves offchain. But it is very good for DeFi — the more dollars and people there are onchain, the more need there will be for onchain finance of all kinds. Payments are just a gateway. — Jake Chervinsky (@jchervinsky) July 18, 2025 This provision creates a notable challenge for institutions and sophisticated investors, who are often obligated by fiduciary duties to seek returns on their capital. With regulated stablecoins unable to offer passive income, these substantial pools of institutional funds may be directed toward alternative avenues for generating returns. Such a scenario allows decentralized finance to become a viable solution…
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