GENIUS Act Prohibits Stablecoin Interest Payments
- GENIUS Act enforces restriction on stablecoin interest payments.
- Federal Reserve oversight and regulatory changes are involved.
- Potential deposit outflows and market impact expected.
The Federal Reserve’s involvement with the GENIUS Act marks a new regulatory landscape for stablecoin issuers aiming to prevent interest payments on these digital currencies within the United States.
This policy aims to counter potential deposit outflow to stablecoins, addressing competition concerns with traditional banks, while awaiting official market impact analysis.
Introduction
The GENIUS Act has been signed into law, officially prohibiting payment stablecoins from paying any interest or yield. This legislation involves oversight by the Federal Reserve and other regulatory bodies, affecting both domestic and foreign issuers.
This move aims to prevent potential deposit flight from banks to stablecoins, with concerns raised about significant outflows. Legal documents confirm absence of formal statements from Federal Reserve leadership on this subject through official channels.
Market Implications
Financial experts warn of up to $6.6 trillion at risk of moving from traditional bank deposits if stablecoins could offer interest. There’s considerable focus on how payment stablecoins like USDC and USDT will adjust to ensure compliance.
The GENIUS Act mandates new competitive dynamics, as bank-issued tokenized deposits remain unaffected regarding interest payments, potentially reshaping market influenced by banks’ strategic decisions and competitive positioning.
Community and Industry Reactions
No significant public statements have been spotted from key crypto figures or developers, offering insight into potential reactions. Presently, official on-chain data has not reflected notable changes due to the GENIUS Act, as implementation is pending.
Historical precedents show SEC regulatory actions previously led to short-term impacts on crypto protocols. The comprehensive federal nature of the GENIUS Act signals further suppression of yield-based stablecoin products within the US financial framework.
“As policymakers consider digital asset market structure legislation, it is important that the requirements in the GENIUS Act, now signed into law, prohibiting the payment of interest and yield on stablecoins are not evaded or undermined.” — Bank Policy Institute, BPI Insights, August 2025
