Ethereum News Today: Trump Signs GENIUS Act Banning Yield-Bearing Stablecoins

The U.S. GENIUS Act, signed into law by President Donald Trump on July 18, has introduced a significant shift in the digital dollar landscape by banning yield-bearing stablecoins [1]. This legislative move aims to preserve the competitive advantage of traditional money market funds (MMFs), which continue to offer yield to investors. As a result, digital dollars are now less attractive for both retail and institutional investors who previously relied on stablecoins as a source of passive returns [1].

Tokenized money market funds are emerging as a viable alternative to stablecoins, offering yield, regulatory oversight, and operational flexibility. According to Temujin Louie, CEO of Wanchain, tokenization allows MMFs to match the speed and accessibility of stablecoins while maintaining the benefits of yield generation [1]. Paul Brody of EY has similarly noted that tokenized MMFs can operate similarly to stablecoins but with enhanced safety and regulatory compliance, potentially shifting investor preference in their favor [1].

However, stablecoins still maintain certain advantages, particularly in decentralized finance (DeFi) use cases. Brody emphasized that stablecoins function as bearer assets and can be easily integrated into DeFi platforms without the complexities of access and transfer controls [1]. If tokenized MMFs come with usage restrictions, the yield advantage alone may not be sufficient to overcome these operational limitations.

The banking industry’s influence on the legislation is evident, as financial institutions have actively lobbied for the yield ban to protect their traditional deposit model. Austin Campbell, a blockchain consultant, noted that banks fear that allowing stablecoins to offer yield could erode their competitive edge, particularly as most bank deposits offer minimal returns [1].

Despite the ban, yield-bearing digital assets still exist under securities regulation. In February, the Securities and Exchange Commission approved the first U.S. yield-bearing stablecoin security, YLDS, issued by Figure Markets, which offered a 3.85% yield at launch. This demonstrates that while the GENIUS Act restricts stablecoin issuers, other regulatory frameworks still allow for yield generation on digital assets [1].

The broader regulatory environment is evolving, with the U.S. signaling a more crypto-friendly approach. Following the signing of the GENIUS Act, the CFTC launched its "Crypto Sprint" initiative, aiming to integrate crypto into the U.S. financial system while promoting innovation and regulatory clarity [2]. Meanwhile, Ethereum-based stablecoin projects are adapting to the new framework, with Ethena Labs recently launching a version of its USDe stablecoin compliant with the act [3].

As tokenized MMFs gain traction, the question remains whether the yield advantage will be enough to tip the balance in their favor. The outcome will depend on how easily these funds can replicate the speed and flexibility of stablecoins while maintaining compliance and safety. For now, the yield ban under the GENIUS Act has added complexity to the evolving relationship between stablecoins and traditional financial instruments.

Sources:

[1] GENIUS Act scrutinized for stablecoin yield ban as TradFi ... (https://cointelegraph.com/news/genius-act-scrutinized-stablecoin-yield-ban-tradfi-tokenization)

[2] CFTC launches Crypto Sprint initiative following Trump's ... (https://cryptobriefing.com/newsbriefs/?id=175648&title=cftc-launches-crypto-sprint-initiative-following-trumps-crypto-regulatory-vision)

[3] Ethereum News Today: USDe Supply Surges 75% in ... (https://www.ainvest.com/news/ethereum-news-today-usde-supply-surges-75-august-2025-rises-largest-stablecoin-2508/)