The current passage of the US GENIUS Act was broadly celebrated as a significant step ahead for stablecoin adoption, however a key provision could curb the attraction of digital {dollars} in comparison with cash market funds, elevating questions on whether or not the invoice’s authors have been swayed by banking trade strain to limit yield-bearing stablecoins.
The GENIUS Act expressly bans issuers from providing yield-bearing stablecoins, successfully stopping each retail and institutional buyers from incomes curiosity on their digital greenback holdings.
Due to this, Temujin Louie, CEO of crosschain interoperability protocol Wanchain, cautioned towards viewing the laws as an unqualified win for the trade.
“In a vacuum, this can be true,” Louie informed Cointelegraph. “However by explicitly prohibiting stablecoin issuers from providing yield, the GENIUS Act truly protects a significant benefit of cash market funds.”
As Cointelegraph reported, cash market funds, or MMFs, are rising as Wall Avenue’s reply to stablecoins, significantly when issued in tokenized kind. JPMorgan strategist Teresa Ho famous that tokenized MMFs may unlock new use circumstances, corresponding to serving as margin collateral.
Louie agrees, claiming that “tokenization permits cash market funds to undertake the pace and suppleness that beforehand made stablecoins distinctive, with out sacrificing security and regulatory oversight.”
Paul Brody, international blockchain chief at EY, informed Cointelegraph that tokenized MMFs and tokenized deposits “may discover a vital new alternative onchain,” particularly within the absence of yield on stablecoin holdings.
“Cash market funds can function and look lots like stablecoins to end-users, however with the distinction that they do provide yield,” Brody stated.
In response to EY’s Brody, the supply of yield may very well be a deciding issue between tokenized MMFs and stablecoins. Nonetheless, he famous that stablecoins retain sure benefits:
“Stablecoins are allowed as bearer belongings, which implies they’ll simply be put into DeFi companies and different onchain monetary companies with out difficult administration of entry and switch controls. If tokenized cash market funds have many restrictions that forestall such utilization, it’s potential the attraction of yield won’t be sufficient to offset the added operational issues.”
Associated: Crypto execs heart stage as Trump indicators stablecoin invoice into legislation
The banking trade’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 vital affect over the continuing coverage debate round stablecoins.
Again in Might, NYU professor and blockchain marketing consultant Austin Campbell cited sources throughout the banking trade, 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 have been allowed to supply yield on to holders, Campbell stated.
Nonetheless, yield-bearing digital belongings do exist within the US, albeit underneath the obvious purview of securities regulation. In February, the Securities and Alternate Fee permitted the nation’s first yield-bearing stablecoin safety, issued by Determine Markets. The token, known as YLDS, supplied a 3.85% yield at launch.
Associated: GENIUS units new stablecoin guidelines however stays imprecise on overseas issuers
