GENIUS Act Bans Stablecoin Yield, Fuels Ethereum DeFi Surge
On July 18, 2025, President Trump’s GENIUS Act takes effect, establishing the US’s first federal regulatory framework for stablecoins and introducing a stablecoin yield ban that prohibits yield-bearing stablecoins. Under the GENIUS Act, issuers face KYC/AML checks, reserve custody, third-party audits and potential issuance caps.
The yield ban has prompted traders and institutions to redirect funds away from yield-bearing stablecoins into Ethereum DeFi protocols to maintain income targets. Data from DeFiLlama shows Ethereum DeFi leads total value locked (TVL), making liquidity pools, lending markets and staking services on Ethereum primary sources of on-chain yield.
Industry leaders, including Tether co-founder Reeve Collins and CoinFund president Christopher Perkins, predict a shift from “stablecoin summer” to “DeFi summer.” Nasdaq’s filing to add staking to the BlackRock iShares ETH ETF underscores growing institutional interest in Ethereum DeFi. Analysts expect further DeFi inflows as yield-bearing fiat tokens adapt to the new legal landscape.
Bullish
The GENIUS Act’s stablecoin yield ban is likely to drive increased demand for Ethereum native DeFi protocols as traders seek alternative yield sources, supporting ETH price. In the short term, shifting capital and compliance integration may cause volatility, but long-term growth in DeFi TVL, institutional staking (e.g., via iShares ETH ETF) and continuous inflows are bullish indicators for ETH.