GENIUS Act Defines US Stablecoin Regulation, Bans Yield Tokens
US Congress has passed the GENIUS Act, establishing the first federal framework for fiat-backed stablecoins. The law sets out strict stablecoin regulation: issuers must obtain a federal license, maintain 1:1 reserves in high-quality liquid assets, undergo independent reserve audits, and disclose full transparency.
The Act also bans yield-bearing stablecoins. This prohibition aims to separate payment-focused tokens from tokenized money-market products and reshape DeFi balance between pure payment tokens and yield products.
According to Fabian Dori, CIO at Sygnum Bank, the new stablecoin regulation will provide legal certainty, boost institutional adoption, and promote responsible innovation and financial stability.
Compared to Europe’s more cautious digital euro approach, the US favours innovation. Crypto traders should monitor licensing timelines, reserve disclosures and stablecoin usage shifts to assess potential market moves.
Bullish
The GENIUS Act’s clear stablecoin regulation reduces legal uncertainty. This improved framework is likely to drive institutional demand and expand market use. Although the ban on yield-bearing tokens may limit some DeFi yield strategies in the short term, the overall effect is bullish for fiat-backed stablecoins. In the long run, clearer rules could attract new issuers and bolster market stability, supporting upward price pressure. Historically, regulatory clarity has led to increased institutional flows, suggesting a positive outlook for stablecoin trading volumes and market depth.