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Trump Signs the GENIUS Act, Transforming the Stablecoin Market
In a groundbreaking move, former U.S. President Donald Trump has enacted the GENIUS Act (Gateway to Eliminating Nullified and Illegal Usage of Stablecoins), sparking waves of change across the stablecoin and cryptocurrency sectors. This new legislation is set to redefine how stablecoins operate within the digital finance ecosystem.
Stablecoins No Longer Permitted to Offer Interest
On October 18, industry sources confirmed that the newly signed GENIUS Act prohibits stablecoins from providing interest income or yield-based incentives to investors. This dramatic policy shift could compel investors to seek alternative investment opportunities in decentralized finance (DeFi) platforms and assets like Ethereum (ETH), which are known for their yield-generating potential.
Previously, interest-earning stablecoins gained widespread popularity by offering attractive annual returns between 3% to 5%, primarily through staking or lending mechanisms. Major players like Circle’s USDC and Tether’s USDT spearheaded this trend. Now, with GENIUS putting interest-bearing mechanisms under legal prohibition, these opportunities are set to disappear.
Institutional Investors Facing Revenue Challenges
The ripple effects of the GENIUS Act will be felt far beyond individual crypto users. Institutional investors, who rely heavily on stablecoin yields to generate revenue, now face mounting challenges in maintaining profitability. Experts believe this will lead financial institutions to explore innovative income streams.
Christopher Perkins, President of CoinFund, commented: “The dollar is a depreciating asset without an interest yield. DeFi and Ethereum-powered protocols will become central to preserving value in this new landscape.”
Digital asset analyst Nick Perclyn agrees, predicting a surge of interest in DeFi solutions as viable alternatives to stablecoin yields. According to DeFiLlama, Ethereum remains the dominant player in the DeFi landscape, powering the majority of total value locked (TVL) across the ecosystem. This positions Ethereum as a critical hub for institutional and individual investors alike.
A Shift from Stablecoins to the DeFi Economy
Industry experts are calling this regulatory turn a key inflection point, marking the potential end of the "stablecoin era" and ushering in what many are dubbing the "DeFi era." By curbing stablecoin income streams, the GENIUS Act could trigger widespread capital reallocation, opening the floodgates for decentralized finance solutions that offer yield-generation while remaining compliant.
Stablecoins, long celebrated for their dual role of stability and yield, now find themselves at a crossroads within the digital asset ecosystem. This legislative shake-up could redefine their utility and pave the way for DeFi to play an increasingly central role in the future of financial innovation.
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