Traditional banks may face unprecedented pressure following the GENIUS Act 2025, which passed the House vote on July. The landmark GENIUS Act bill, aims to establish clear regulatory standards for stablecoins, and in doing so, could fundamentally shift capital away from banks toward digital assets.
According to Multicoin Capital’s co-founder Tushar Jain, the new framework may mark “the beginning of the end” for banks’ dominance over retail deposits. If stablecoins begin offering competitive yields, trillions of dollars could flow out of traditional savings accounts into blockchain-based alternatives.
Why Banks Are Concerned About the GENIUS Act Stablecoin Framework
While the GENIUS Act prohibits stablecoin issuers from directly paying interest to holders, it leaves a loophole for affiliates, crypto exchanges, and DeFi protocols that could distribute yield indirectly. This potential grey area could allow yield-bearing stablecoins to become widely available.
Banking associations warn that the GENIUS Act stablecoin provisions could drain U.S. deposits. The U.S. Treasury Department estimates that up to $6.6 trillion could move from banks to stablecoins if yield-bearing options gain traction. Such an outflow would pressure banks to raise deposit rates, eroding their profits and reshaping competition between legacy finance and crypto-native institutions.
Stablecoins vs. Banks: The Yield Gap Widens
Average savings accounts in the U.S. pay around 0.40%, and European banks average near 0.25%. In contrast, decentralized lending platforms like Aave currently offer 3.6%–4.0% yields on Tether (USDT) and USD Coin (USDC).
That’s nearly ten times more than what banks offer, and this difference underscores the threat the GENIUS Act stablecoin bill poses to the traditional banking model.
The GENIUS Act House vote may therefore be remembered as a turning point, enabling compliant stablecoin issuers and exchanges to deliver real yield in a way that still adheres to U.S. regulatory standards.
Big Tech Could Join the Stablecoin Race
Tushar Jain also noted that major technology players like Apple, Google, and Meta could soon issue or integrate GENIUS Act-compliant stablecoins into their ecosystems. Such moves would expand stablecoin access globally, offering instant settlements, low fees, and 24/7 payment areas where banks still lag. If this happens, the GENIUS Act 2025 bill could reshape not only crypto regulation but also global payments infrastructure, blending fintech and decentralized finance.
Stablecoins vs. Tokenized TradFi: The Yield Dilemma
The GENIUS Act stablecoin restrictions come just as tokenized money market funds (MMFs) are gaining momentum. Institutions like BlackRock, BNY Mellon, and JPMorgan are rapidly tokenizing real-world assets that already provide 4–5% annual returns, a stark contrast to non-yielding stablecoins.
“By prohibiting yield directly, the GENIUS Act inadvertently protects the competitive advantage of money market funds,” said Temujin Louie, CEO of Wanchain. This echoes industry concerns that while the bill brings legitimacy, it could disadvantage stablecoins versus yield-generating TradFi products.
Market Growth: Stablecoins Could Hit $2 Trillion
The global stablecoin market stands at roughly $308 billion, led by Tether (USDT) and USD Coin (USDC). However, with regulatory clarity from the GENIUS Act 2025, analysts forecast that stablecoin capitalization could surge fivefold to reach $2 trillion by 2028.
At that scale, stablecoins could rival national banking systems, offering transparency, programmability, and real-time settlements that traditional institutions cannot match.
GENIUS Act Marks a Defining Moment
The GENIUS Act 2025 may prove to be the most consequential piece of crypto legislation yet. While it bans yield-bearing stablecoins directly, it leaves enough flexibility for innovation, setting the stage for crypto-native yield models, tokenized Treasuries, and institutional DeFi adoption.
As tokenized money market funds and yield-generating products grow, stablecoins will need to evolve or risk being left behind. Either way, the GENIUS Act bill cements stablecoins as a legitimate financial instrument and one that could soon redefine global liquidity, savings, and payment rails.
FAQ
What is the GENIUS Act?
The GENIUS Act (Guaranteed Essential National Infrastructure for U.S. Stablecoins) is a U.S. federal bill that regulates the stablecoin market, mandating full asset backing, monthly audits, and licensing for issuers.
What exactly is the GENIUS Act about?
It aims to protect consumers and financial stability by ensuring that stablecoins are backed by real-world assets and issued under strict regulatory guidelines. It also bans algorithmic stablecoins.
Has the GENIUS Act passed?
Yes. The U.S. House of Representatives passed the GENIUS Act with bipartisan support (308–122) and it now awaits President Trump’s final approval.
GENIUS Act summary
Stablecoins must maintain 100% reserves
Monthly third-party audits required
Must be licensed by federal or state authorities
Bans algorithmic stablecoins
Attached provision: bans Central Bank Digital Currencies (CBDCs)
