How the GENIUS Act Supercharges DeFi Lending’s Stablecoin Foundation

Stablecoins just got a regulatory adrenaline shot—and DeFi's lending markets are first in line to benefit.

The GENIUS Act isn't just another acronym lost in DC's legislative graveyard. It's a rare bipartisan win that actually understands crypto's plumbing. By clarifying stablecoin rules, it removes the regulatory fog hanging over DeFi's most critical collateral.

Why this matters now: Lending protocols have been running on stablecoin fumes for years. Tether and USDC dominate collateral pools, but institutional players kept one foot out the door, waiting for clearer rules. The GENIUS Act cuts through that hesitation like a hot knife through... well, through the usual bureaucratic butter.

Here's the kicker: The bill doesn't just legitimize stablecoins—it forces issuers to actually hold the reserves they claim. Imagine that: transparency in crypto. Who knew?

Of course, Wall Street will find a way to screw this up. Give them a regulated stablecoin, and they'll probably invent some leveraged derivative that blows up in 18 months. But for now? This is the regulatory clarity DeFi needed to graduate from basement experiments to mainstream finance's annoying younger sibling.

Enter the GENIUS Act

Passed by Congress and signed by President TRUMP on July 17, 2025, the Guiding and Establishing National Innovation for U.S. Stablecoins Act is the first federal legislation in the U.S. to create a formal regulatory framework for stablecoins. 

At its core, the GENIUS Act introduces a legal basis for stablecoins that are fully collateralized 1:1 with fiat (typically U.S. dollars or other highly liquid assets), issued by non-bank entities legally operating in the United States, and licensed under a new federal “GENIUS license” or equivalent state frameworks.

It also sets clear, enforceable rules for reserve requirements, anti-money laundering procedures, and KYC compliance, as well as public disclosures and regular audits of reserves. Trump called this legislation a “new, exciting frontier” for crypto. Crypto builders agree, but not in the way one might think. 

Not so grim for the DeFi lending land

I’ve seen comments and opinions that are not very excited about this legal development. And I understand why: Regulation doesn’t sound very ‘crypto land-y.’ And there’s especially a lot of frustration around what this could mean for DeFi lending, once one of the most popular areas of crypto.

Here’s the thing: the GENIUS Act doesn’t regulate DeFi, at least directly, that is. But it does handle the questions around the quiet infrastructure behind nearly every major DeFi lending protocol.

DeFi lending protocols depend on stablecoins for collateral, liquidity, and settlement. If those stablecoins aren’t credible, the whole system gets shaky. By setting strict requirements for reserves, audits, and compliance, the GENIUS Act gives DeFi access to a more secure and transparent type of stablecoin.

In practice, this could mean stronger collateral quality across lending markets, better protection for users in case an issuer fails, and clearer legal standing, making DeFi more attractive to institutions and serious builders. This doesn’t just reduce systemic risk — it helps DeFi mature into a more trustworthy and scalable alternative to traditional finance.

Sure, this law doesn’t solve everything. It doesn’t address algorithmic or crypto-backed stablecoins. It leaves wiggle room around terms like “timely redemption.” And it doesn’t directly govern how DeFi protocols use these assets. But it’s a big step in the right direction. And it’s much more than the industry had till July 17.

The bottom line

The GENIUS Act is about more than regulating stablecoins; it also lays the groundwork for a more stable, credible, and scalable DeFi ecosystem. By giving legal clarity and enforceable standards to fiat-backed stablecoins, it supports innovation without smothering it. Users get safer, more reliable tools. And the infrastructure that powers open finance gets a much-needed upgrade.

DeFi remains DeFi, but now with a more resilient, more compliant infrastructure underneath it. That makes the entire space more robust, not just for early adopters and builders, but for the next wave of users entering web3.

Because here’s the truth: freedom in finance only matters if it’s built on something stable. The GENIUS Act doesn’t restrict decentralization — it helps ensure it doesn’t collapse under its own weight. It’s not about limiting innovation. It’s about making sure the foundation doesn’t crack the moment real volume, real users, or real pressure shows up.

Vlad Kamyshov is the CEO of EVAA Protocol, a leading player in the TON ecosystem. With a DEEP understanding of the DeFi market, Vlad is committed to bringing value to the web3 audience. Under his leadership, the project raised a pre-seed round in the summer of 2023 and secured $2.5 million in 2025, fueling EVAA’s rapid growth. He also forged strategic partnerships with key players in the TON ecosystem — including the TON Foundation, Notcoin, Storm Trade, Pyth, Telegram Wallet — and integrated EVAA into major platforms like Tonkeeper, Tonstakers, Bemo, TON Space as well as prominent CEXs such as OKX, Bitget, and Gate.io.