The recently enacted GENIUS Act has prohibited stablecoin issuers from offering yield-bearing products, significantly diminishing stablecoins’ competitive advantage against traditional financial instruments. The legislation explicitly bars returns on stablecoin holdings, making tokenized money market funds (MMFs) increasingly attractive alternatives due to their ability to offer yield under regulatory oversight.
Industry analysts including Temujin Louie and Paul Brody note that tokenized MMFs combine the traceability of blockchain assets with established regulatory frameworks, positioning them as prime substitutes for yield-seeking investors. Banking sector influence reportedly contributed to the yield ban, driven by concerns that interest-bearing stablecoins could draw depositors away from traditional institutions.
Notably, the approval of yield-bearing instruments like YLDS indicates that certain regulated yield-generating tokens remain permissible despite the restrictions. This legislative shift redirects innovation toward compliant yield products and reshapes the decentralized finance landscape by accelerating adoption of tokenized traditional financial vehicles.