The U.S. GENIUS Act has been signed into law.
In the bill’s wake a flurry of TradFi and consumer goods companies have signalled they are considering issuing their own stablecoins. These include (amongst others); Walmart, Amazon, PayPal, Bank of America, Citigroup. Conversely, Trump had ruled out a CBDC in January, by Executive Order. It seems the future of the Dollar is official: it is to be a privatised endeavour.
The GENIUS Act and DeFi Liquidity Mining
Stablecoins are a staple of the DeFi liquidity mining sector, with 279 listed on DeFiLamma.com, at time of publication.
However, with a key provision in the Genius Act being that issuers are forbidden from paying “any form of interest or yield (whether in cash, tokens, or other consideration) solely in connection with the holding, use, or retention of the stablecoin” – as per the Hagerty Amendment Changes. This is sure to drive an increase in usage of DeFi lending protocols.
Although the largest issuers of stablecoins – Tether and Circle – have in the past never directly paid interest to holders, it prevents new issuers from doing so, retaining the market framework.
With the 7th largest owner of United States’ Treasuries being Tether, one cannot help but wonder if some lobbying was at play with the Hagerty Amendment. Had that Amendment not passed, an institution such as BoA could issue their stablecoin, and offer it to their millions of customers’ yield-bearing savings accounts. As this Amendment prevents this, and due to banks’ cautious risk management approach, it is unlikely that one TradFi firm such as BoA would offer yield bearing accounts of another’s – i.e. Chase – stablecoin. However, protocols such as Curve, Maker and Compound would have no such qualms about the ‘BoAUSD’.
Financial Institutions vs DeFi Protocols in the Hunt Stablecoin Yields
Tokenized MMFs – like those offered by Franklin Templeton or BlackRock – would present as an avenue for customers to seek yields.
So if, as seen above, FIs are (naturally) unwilling to direct customers to one another’s stablecoin yielding products, what would the landscape look like in a few years’ time? A FinTech running the front-end for a TradFi has been the operational MO in consumer finance in the past few years.
So where would the edge of DeFi protocols come from? Simply put, as it ever was: innovation in product offerings.
Speculatour 