SEC Regulates Yield-Bearing Stablecoins

GENIUS Act Redefines Yield-Bearing Stablecoins

• The GENIUS Act, signed into U.S. law in July 2025, distinguishes between stablecoins for payments and yield products as investments.
• The law mandates that payment stablecoins must be fully reserved, auditable, and non-interest-bearing.
• Issuers of widely used settlement stablecoins like Tether (USDT) and Circle (USDC) cannot offer yield on their tokens under the new regulation.
• The Act requires payment stablecoins to have a 1:1 reserve ratio with high-quality liquid assets such as cash and short-dated U.S. Treasuries.
• Yield-bearing stablecoin projects like Falcon Finance, Ethena, and Sky Protocol manage yields through staking and wrapper tokens rather than direct issuer payments.

The GENIUS Act redefines yield-bearing stablecoins by separating yield instruments from non-yielding payment stablecoins. Projects like Falcon Finance, Ethena, and Sky Protocol comply by using staking and wrapper tokens to distribute yields without violating the new regulations.