GENIUS Act Clears Path for Stablecoins – While Quietly Protecting Banks
The GENIUS Act, signed into law in July, was billed as a breakthrough moment for U.S. stablecoin regulation. Supporters praised it as the clearest framework yet for digital dollars, predicting a surge in adoption.
But one detail buried in the legislation is now sparking controversy: stablecoin issuers are forbidden from paying interest to holders.
This restriction may have bigger consequences than most realize. By removing the ability to offer returns, the law hands a quiet advantage to tokenized money market funds — a traditional finance product now making its way onto blockchains. These funds, already common in Wall Street portfolios, can pay yield while still matching many of the speed and settlement benefits stablecoins are known for.
Temujin Louie, CEO of interoperability platform Wanchain, believes the yield ban tilts the field. “Tokenized MMFs now have the same tech perks without giving up their ability to earn for investors,” he said, adding that the move could reshape where capital flows in the on-chain economy.
Analysts at EY agree that money market products could find fresh momentum, especially as banks explore tokenized offerings. Paul Brody, the firm’s global blockchain leader, said yield might sway some users away from stablecoins, but he also stressed that bearer-asset functionality still gives stablecoins a DeFi-friendly edge. MMFs, in contrast, often carry compliance rules and transfer restrictions that make them harder to plug into open blockchain systems.
Behind the scenes, industry watchers suspect the banking lobby’s fingerprints on the legislation. For decades, banks paid minimal interest to depositors; allowing stablecoins to compete on yield could have threatened that model. Earlier this year, blockchain policy experts pointed to active lobbying to ensure stablecoins could not directly pay holders.
Yield-bearing digital assets aren’t entirely gone — Figure Markets rolled out a regulated, interest-paying stablecoin earlier this year — but such products face securities oversight, a route most issuers may avoid.
In the end, the GENIUS Act delivers a paradox: it clears a path for stablecoins to operate more freely under U.S. law while removing one of their most appealing features. Whether investors prioritize yield or the frictionless nature of DeFi could decide which asset — yield-free stablecoins or interest-bearing tokenized funds — dominates the next phase of the digital dollar race.
The information provided in this article is for informational purposes only and does not constitute financial, investment, or trading advice. Coindoo.com does not endorse or recommend any specific investment strategy or cryptocurrency. Always conduct your own research and consult with a licensed financial advisor before making any investment decisions.
Alex is Editor-in-Chief of Coindoo and co-founder of Millennial Media Group, with nearly a decade of experience covering financial markets - crypto first, then everything else. It started in 2016 with Bitcoin. Like most people at the time, he didn't fully understand it - so he kept digging. Blockchain, tokenomics, the projects, the cycles. That curiosity never stopped, and eventually pulled him into traditional markets too: equities, commodities, macro. Not because he left crypto behind, but because you can't properly understand one without the other. What drives him is straightforward: he wants to know why something is happening, not just that it's happening. Most market coverage stops at the headline - price up, price down, here's a chart. Alex finds that kind of reporting actively unhelpful. If you walk away from an article without understanding the mechanism behind the move, what did you actually learn? He holds a degree in Tourism from New Bulgarian University - not the most obvious path into financial markets, but markets have a way of pulling in people who are simply too curious to stay out. He has authored over 200 in-depth analyses and more than 10,000 articles across crypto and traditional finance. He still thinks every day in markets teaches him something new. That's probably why he hasn't stopped.
