The current passage of the US GENIUS Act was extensively celebrated as a serious step ahead for stablecoin adoption, however a key provision might curb the enchantment of digital {dollars} in comparison with cash market funds, elevating questions on whether or not the invoice’s authors had been swayed by banking business stress to limit yield-bearing stablecoins.
The GENIUS Act expressly bans issuers from providing yield-bearing stablecoins, successfully stopping each retail and institutional traders from incomes curiosity on their digital greenback holdings.
Because of this, Temujin Louie, CEO of crosschain interoperability protocol Wanchain, cautioned towards viewing the laws as an unqualified win for the business.
“In a vacuum, this can be true,” Louie instructed Cointelegraph. “But by explicitly prohibiting stablecoin issuers from providing yield, the GENIUS Act really protects a serious benefit of cash market funds.”
As Cointelegraph reported, cash market funds, or MMFs, are rising as Wall Street’s reply to stablecoins, significantly when issued in tokenized kind. JPMorgan strategist Teresa Ho famous that tokenized MMFs may unlock new use instances, equivalent to serving as margin collateral.
Louie agrees, claiming that “tokenization allows cash market funds to undertake the pace and adaptability that beforehand made stablecoins distinctive, with out sacrificing security and regulatory oversight.”
Paul Brody, international blockchain chief at EY, instructed Cointelegraph that tokenized MMFs and tokenized deposits “may discover a important new alternative onchain,” particularly within the absence of yield on stablecoin holdings.
“Money market funds can function and look loads like stablecoins to end-users, however with the distinction that they do provide yield,” Brody stated.
According to EY’s Brody, the supply of yield might be a deciding issue between tokenized MMFs and stablecoins. Still, he famous that stablecoins retain sure benefits:
“Stablecoins are allowed as bearer property, which implies they’ll simply be put into DeFi providers and different onchain monetary providers with out sophisticated administration of entry and switch controls. If tokenized cash market funds have many restrictions that forestall such utilization, it’s attainable the attraction of yield won’t be sufficient to offset the added operational issues.”
Related: Crypto execs heart stage as Trump indicators stablecoin invoice into legislation
The banking business’s grip on the stablecoin debate
The GENIUS Act’s prohibition on yield-bearing stablecoins got here as little shock, with Cointelegraph beforehand reporting that the banking foyer seems to have exerted important affect over the continuing coverage debate round stablecoins.
Back in May, NYU professor and blockchain advisor Austin Campbell cited sources throughout the banking business, revealing that monetary establishments are actively lobbying to dam interest-bearing stablecoins to guard their long-standing enterprise mannequin.
After a long time of providing depositors minimal curiosity, banks feared their competitiveness could be threatened if stablecoin issuers had been allowed to supply yield on to holders, Campbell stated.
Still, yield-bearing digital property do exist within the US, albeit below the obvious purview of securities regulation. In February, the Securities and Exchange Commission accepted the nation’s first yield-bearing stablecoin safety, issued by Figure Markets. The token, known as YLDS, provided a 3.85% yield at launch.
Related: GENIUS units new stablecoin guidelines however stays imprecise on international issuers
