The GENIUS Act, signed into law by US President Donald Trump on July 18, bans issuers from offering yield-bearing stablecoins. The law prevents investors from earning interest on digital dollar holdings, affecting both retail and institutional participants.
Temujin Louie, CEO of Wanchain, addressed this in his statement.
“But by explicitly prohibiting stablecoin issuers from offering yield, the GENIUS Act actually protects a major advantage of money market funds.”
The stablecoin yield ban has raised questions about its impact, especially as money market funds (MMFs) gain attention in tokenized form. These funds remain competitive by providing regulated yield while stablecoins are restricted under the new law.
Tokenized money market funds are growing in traditional finance. JPMorgan strategist Teresa Ho said tokenized MMFs could be used for margin collateral and other financial functions. Tokenization allows MMFs to move funds faster and match some of the efficiency that stablecoins previously offered.
Louie explained that tokenization brings MMFs closer to stablecoins.
“Tokenization enables money market funds to adopt the speed and flexibility that previously made stablecoins unique, without sacrificing safety and regulatory oversight,”
he said.
Paul Brody, EY’s global blockchain leader, added that “tokenized MMFs and tokenized deposits could find a significant new opportunity onchain,” especially because they offer yield while stablecoins do not under the GENIUS Act.
Despite the stablecoin yield ban, stablecoins maintain a role in decentralized finance. Brody noted,
“Stablecoins are allowed as bearer assets, which means they can easily be put into DeFi services and other onchain financial services.”
He added that tokenized MMFs may face access and transfer restrictions, limiting their use in decentralized platforms. Stablecoins, by contrast, continue to move freely in DeFi ecosystems, where they are widely used for trading and settlement.
This separation shows how the GENIUS Act stablecoin ban creates two categories: regulated tokenized assets offering yield and flexible stablecoins without interest options.
The GENIUS Act’s yield ban aligns with reports of banking sector influence. In May, NYU professor Austin Campbell stated that banks actively lobbied against yield-bearing stablecoins. His sources indicated that banks feared competition from digital dollars offering direct interest to holders.
Campbell highlighted that banks have traditionally paid low interest to depositors. Yield-bearing stablecoins could have challenged that practice, leading to industry pressure during legislative discussions.
While the GENIUS Act prohibits stablecoin yields, other regulated paths exist. In February, the Securities and Exchange Commission (SEC) approved Figure Markets’ YLDS token, a yield-bearing stablecoin security. It launched with a 3.85% yield and falls under securities oversight, separate from the GENIUS Act’s scope.
This development shows how regulated yield-bearing digital assets operate differently from stablecoins restricted under the law. It underscores the divide between stablecoin regulation and the expansion of tokenized finance.
The stablecoin yield ban intersects with the rise of tokenized finance. As tokenized MMFs grow, they provide yield within a regulated framework, while stablecoins in DeFi remain yield-free but offer unrestricted movement.
This regulatory split places stablecoins and tokenized money market funds at the center of ongoing debates about digital dollar use, DeFi integration, and banking sector involvement in shaping stablecoin policy.
