The recent U.S. GENIUS Act, signed into law on July 18, 2025, which bans yield-bearing stablecoins, isn't expected to deter institutions from seeking yield on their holdings. According to Will Beeson, CEO of Uniform Labs and former Standard Chartered executive, this legislation might unintentionally drive capital into the tokenization market as investors seek yield-generating opportunities.
The GENIUS Act expressly prohibits stablecoin issuers from offering yield-bearing stablecoins, preventing both retail and institutional investors from earning interest on their digital dollar holdings. This has raised concerns that the bill's authors may have been influenced by banking industry pressure to restrict yield-bearing stablecoins, as traditional banks feared competition from yield-bearing stablecoins. NYU professor Austin Campbell claimed that traditional banks are threatened by yield-bearing stablecoins, because they can potentially erode banking profits. Senator Kirsten Gillibrand argued that private stablecoin issuers passing on interest opportunities to customers would undermine the market for loans and crater demand for legacy banking services.
Despite the ban, the demand for yield on dollar-equivalent assets remains strong. As capital seeks the path of least resistance to the highest ground, the market is adapting. Since the enactment of the GENIUS Act, protocols that offer yield through other mechanisms have seen significant capital inflows. Specifically, analysts believe the removal of yield on stablecoins "is great news for Ethereum-based DeFi as the main alternative for passive income generation".
Beeson notes that trillions of dollars in non-interest-bearing stablecoins are poised to enter digital finance. Institutional holders are unlikely to sit on idle, depreciating assets and will demand yield and infrastructure that makes accessing it compliant. He believes the next phase isn't about holding idle stablecoins but about programmatic access to risk-free yield and the ability to move between cash and high-quality assets at will.
To meet this need, Uniform Labs is building Multiliquid, an institutional liquidity layer for tokenized markets that enables programmable, real-time conversion between tokenized assets, such as US Treasurys and money market funds, and stablecoins. This platform aims to provide a compliant way for institutions to earn yield while staying liquid.
The GENIUS Act could accelerate capital flows into tokenized real-world assets (RWAs). Tokenized MMFs could unlock new use cases, such as serving as margin collateral. Tokenization enables money market funds to adopt the speed and flexibility that previously made stablecoins unique, without sacrificing safety and regulatory oversight. While stablecoins retain advantages as bearer assets that can easily be used in DeFi services, the availability of yield could be a deciding factor between tokenized MMFs and stablecoins.
The stablecoin market is experiencing a profound realignment. Capital that once flowed to traditional, yield-paying stablecoins is seeking alternatives. For example, Ethena's USDe has become the fastest-growing stablecoin, reaching $10 billion in TVL in just 500 days, after the GENIUS Act banned most stablecoin yields. Sky's USDS has also reaped significant benefits, with its supply growing by 23%.
Finzly, a payment infrastructure provider, is preparing to support stablecoins and tokenized deposits, recognizing the growing demand for programmable money. McKinsey & Company reports stablecoin circulation has doubled to $250 billion over the past 18 months, with forecasts to reach $400 billion by year-end and $2 trillion by 2028.
Despite the GENIUS Act's ban on yield-bearing stablecoins, institutions will continue to seek yield, driving innovation and growth in the tokenization and DeFi markets. The focus is shifting towards compliant and efficient ways to access yield through tokenized assets and DeFi protocols.
