The GENIUS Act’s Stablecoin Yield Ban May Fuel DeFi Growth

The GENIUS Act, now signed into law, imposes restrictions on yield-bearing stablecoins, preventing issuers from passing interest earned on reserves to holders. This regulatory MOVE creates a void for institutional investors seeking yield—a gap decentralized finance (DeFi) is poised to fill.

Market observers note the legislation could accelerate capital flows into DeFi protocols. "The more dollars and people there are onchain, the more need there will be for onchain finance of all kinds," says Jake Chervinsky, a prominent crypto legal expert. The act's framework for stablecoin adoption may ironically strengthen DeFi's position as the go-to venue for yield generation.

While the law specifically targets centralized stablecoins with off-chain reserves, its Ripple effects are already being felt across crypto markets. The coming months will reveal whether traditional finance's loss becomes DeFi's gain as the sector evolves to meet institutional demand.