The GENIUS Act and where stablecoin yield lives now

The Guiding and Establishing National Innovation for US Stablecoins Act, signed into law on 18 July 2025, is the first comprehensive federal framework for fiat-backed stablecoins in the United States. It defines who may issue a payment stablecoin, what must back it, how reserves are disclosed and redeemed, and which regulators supervise the issuer. Implementing rules have been issued through 2026, and the statute takes effect on the earlier of 18 January 2027 or 120 days after the primary regulators finalize their rules.

The yield prohibition

The provision with the widest consequences for asset managers is a short one. A permitted issuer may not pay any form of interest or yield to a holder solely for holding the stablecoin, whether in cash, tokens or other consideration. The Congressional Research Service’s summary of the stablecoin yield debate lays out the policy argument: a yield-bearing dollar token that behaves like a bank deposit but sits outside deposit insurance and bank regulation could pull funding out of the banking system. The Bank Policy Institute has argued for closing what it calls the payment-of-interest loophole, and the OCC’s March 2026 proposed rule introduces a presumption that routing yield through an affiliate or a third party violates the prohibition.

What the law does not cover

The prohibition applies to payment stablecoins and their issuers. It does not apply to instruments that are legally something else: tokenized money market funds, which are securities; lending positions, which are credit; staking-style products, which are services. State Street Global Advisors’ explainer makes the distinction directly: anything that returns value to a holder outside the payment stablecoin wrapper lives in a different legal box with its own disclosures. That is why yield-bearing tokens from the large tokenization issuers are structured and marketed apart from payment stablecoins, and why the fastest-growing part of the dollar-token market in 2026 is the yield-bearing wrapper rather than the payment coin.

Consequences for a yield book

For a manager running a stablecoin-yield sleeve, the law draws a clean line through the sources of yield described elsewhere on this site. Lending stablecoins to on-chain markets is unaffected; the yield comes from borrowers, not the issuer. Treasury-backed tokenized funds are unaffected; they are securities available to eligible holders. Synthetic dollars backed by a basis trade are outside the payment stablecoin definition as long as they are not marketed as one. What changes is the settlement layer: the payment stablecoins the book uses to move value will not carry yield, which makes the discipline of holding them in the smallest size a flow requires, and sweeping the rest into productive instruments, a regulatory fact as well as an operational one.

• Payment stablecoins: no issuer-paid yield; use as settlement currency, hold in minimum size
• Tokenized money market funds: securities, eligible holders only, yield passes through from Treasuries
• On-chain lending of stablecoins: yield from borrower demand, governed by protocol risk not issuer rules
• Basis-backed synthetic dollars: outside the payment stablecoin definition, sized as a funding position

What to watch

The final rules from the OCC, the Federal Reserve and the FDIC will determine how broadly the anti-evasion presumption reaches, and therefore whether some third-party reward programs survive. The treatment of non-US issuers seeking access to the US market will shape which stablecoins qualify as settlement currency. And the interaction between this framework and the securities rules that govern tokenized funds will define where the boundary between a payment coin and an investment sits for years.