Congress is preparing to pass the GENIUS Act, a law that could permanently reshape crypto. The bill will regulate stablecoins in the U.S. and ban them from paying any interest. That marks the end of an era in decentralized finance where stablecoins quietly offered passive returns while skirting clear oversight.
The new law sets strict compliance rules. Stablecoins must be backed by actual cash or short-term Treasury bills. They also must follow strict accounting standards and keep reserves separate.
These rules bring clarity but also limit who can operate within legal boundaries. Only a small fraction of existing stablecoins may qualify. The real shift comes from the interest ban. DeFi platforms have long offered stablecoins that pay yield through lending, staking, or automated pools.
GENIUS act blocks yield-bearing Stablecoins
Under GENIUS, those coins no longer count as legal payment tokens. Yield-bearing coins now fall outside the new rules and into the same gray zone regulators want to eliminate. Lawmakers say this protects the banking system.
Yield-bearing stablecoins risk pulling billions out of traditional banks, weakening their ability to fund loans and daily operations. With no yield allowed, stablecoins stay in their lane, as simple, digital cash equivalents. But the effects reach deeper.
If stablecoins must hold cash and short-term Treasuries, that ties their reserves to the U.S. debt market. As DeFi grows, so does its exposure to Treasury risk. That means crypto’s most used assets now react to changes in government interest rates. If rates spike or liquidity dries up, crypto may face chain reactions.
DeFi faces new rules under the GENIUS act
Still, some believe this is a necessary evolution. Without built-in yield, DeFi protocols must design better systems to generate returns. They’ll need to show exactly how returns are earned, what risks are involved, and who carries them. That creates more transparency and better risk controls.
The GENIUS Act draws clear lines. It favors stablecoin models that comply with banking-level rules. It also discourages projects that try to blur the line between money and investment products. DeFi must now mature into a system with visible safeguards, not just high returns.
This law doesn’t kill innovation. It closes one chapter of easy yield and opens another that demands discipline. DeFi now has a path forward, but it must walk it with clarity, accountability, and stronger foundations.
