The GENIUS Act Shifts Focus to Ethereum DeFi: What it Means for Stablecoin Holders
In a big move, President Donald Trump signed the GENIUS Act into law on July 18, 2025, effectively banning all yield-bearing stablecoins across the United States. This latest laws puts a halt to earning passive income via stablecoins through methods like staking or lending, impacting each institutional and individual holders.
Implications for Institutional and Retail Investors
The crackdown affects each big players and on a regular basis individuals who previously relied on these stablecoins to earn interest-like returns by locking their tokens in decentralized platforms. With this avenue closed, the highlight is now shifting to Ethereum-based decentralized finance (DeFi), which continues to supply yield opportunities.
Analysts Weigh In: A Boost for Ethereum DeFi?
According to analyst Nic Puckrin, this ban might just be the catalyst for a pivot toward Ethereum DeFi. He suggests that the change will likely be seen as “great news for Ethereum-based DeFi” since those in quest of yields could increasingly turn to Ethereum’s DeFi protocols.
Ethereum DeFi: A New Frontier for Passive Income
Data from DeFiLlama indicates that Ethereum DeFi holds the lion’s share of the overall value locked (TVL) within the decentralized finance ecosystem. With the stablecoin yield ban removing certainly one of the safer interest-generating avenues within the regulated space, institutions might redirect their investments into DeFi to fulfill performance goals.
Institutions Eyeing DeFi
Financial firms, tasked with generating income on assets to fulfill fiduciary responsibilities, could see DeFi as their next best choice. The absence of yield-bearing stablecoins might drive higher inflows into the DeFi sector.
Christopher Perkins, President of CoinFund, aptly summarized the situation: “The dollar is a depreciating asset without yield.” He added, “DeFi is where you can generate that yield to preserve value.” Perkins sees this as a possible shift from “stablecoin summer” to “DeFi summer.”
Regulated Finance and DeFi: An Ongoing Dance
In a notable development, Nasdaq filed to incorporate staking within the BlackRock iShares ETH ETF, showcasing ongoing interest in Ethereum DeFi from the regulated finance sector.
Stablecoin Yield: A Threat to Traditional Banking?
U.S. Senator Kirsten Gillibrand weighed in through the DC Blockchain Summit in March, noting that yield-bearing stablecoins could reduce reliance on banks. She highlighted the potential for these tokens to permit users to earn yields without traditional financial services. Her remarks reflect a priority that the stablecoin yield ban goals to guard conventional bank deposit models.
Criticism has arisen, with Austin Campbell, a professor at New York University, accusing banks of feeling “threatened” by these revolutionary financial tools. He suggested in a May post that some lawmakers is likely to be defending a “cartel” structure in finance.
Future of Yield-Bearing Tokens
Reeve Collins, co-founder of Tether, shared his perspective, predicting that yield-bearing fiat-backed tokens will likely surpass traditional stablecoins. Collins emphasized the growing competition from decentralized yield platforms, which is already reshaping the financial landscape.
A U.S. Senate document confirmed that the GENIUS Act explicitly bans all yield-offering stablecoins, without leaving room for exceptions. All U.S. stablecoin issuers must now avoid any interest-bearing features.
DeFi’s Growing Appeal in Light of Legal Changes
This ban changes how each institutions and individuals engage with onchain assets. With DeFi protocols on Ethereum still enabling yield through liquidity pools, lending, and staking, many investors might pivot to decentralized platforms because the legal restrictions settle in.
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