Recently passed US laws are expected to shift the trends in investment in cryptocurrencies and increase the interest in Ethereum-based decentralized finance.
U.S. President Donald Trump enacted the GENIUS bill into law on Friday, making it illegal for the production of yield-generating stablecoins nationwide. Previously, the digital coins rewarded holders with returns by performing things like staking or lending.
Stablecoin returns absence has stripped away the main driving factor for institutions and US retail investors. Investors predominantly depend on passive sources for returns in an effort to sustain capital value within a losing fiat system.
Ethereum’s DeFi platforms now appear the most ideal for those in need of on-chain sources of revenue. Analysts believe that removing yield incentives for US-regulated stablecoins could catalyze increasing interest in Ethereum’s DeFi protocols. The sites allow users the ability to earn returns through decentralized borrowing, lending, and staking models.
Crypto analyst Nic Puckrin explained that Ethereum DeFi is a natural substitute for the users who previously earned interest with the assistance of stablecoin positions.
Ethereum leads decentralized finance market share
Ethereum dominates the greatest share of the aggregate value held within the decentralized finance protocols currently, according to industry platform DeFiLlama.
Financial institutions might now find themselves needing to look at DeFi protocols in order to match their earnings demands. Institutions typically require stable, regulated returns in an effort to satisfy shareholders and achieve predictable capital outcomes.
There is agreement between conventional finance professionals and cryptocurrency enthusiasts that yield is not an option, but an imperative in today’s financial atmosphere.
Senator Kirsten Gillibrand previously warned that yield-bearing stablecoins might impair regular banking operations. She worried that the assets might discourage people from visiting neighborhood banks for basic services like loans.
Others, however, see the legislation as more a response to industry fear rather than consumer protection. New York University professor Austin Campbell observed that banking institutions are threatened by the competition presented by the high-yield products of stablecoins.
Tether co-founder Reeve Collins supported this argument, extrapolating further that interest-bearing stablecoins would inevitably take the place of traditional tokens. He noted that higher returns would inevitably attract more attention among investors in the future.
As the regulatory landscape rewires the digital asset space, Ethereum and the DeFi market may see growing adoption among yield-hunting investors.
