The GENIUS stablecoin bill has introduced a major restriction in the United States: regulated stablecoins can no longer offer yield to users.
That means no more interest from holding coins like USDC or PYUSD through centralised platforms. While the move aims to protect traditional banks, it removes one of the most popular use cases for stablecoins, earning passive income.
In response, users and institutions may turn to decentralised alternatives on Ethereum. With lending, borrowing, and staking still available on-chain, Ethereum-based DeFi protocols could see more activity from those still looking for returns outside of the banking system.
How the GENIUS Bill Alters Stablecoin Use
Signed into law by former President Donald Trump, the GENIUS bill redefines stablecoins as a form of digital cash. This means all regulated stablecoins must be fully backed by real assets such as US dollars or Treasury securities.
It also introduces a strict ban on offering interest to users, cutting off a widely used feature. The government’s stated goal is to create safer payment systems and reduce the chance of unstable coins entering the market.
However, the restriction on yield is not only about protecting users. It is also about protecting banks. Senator Kirsten Gillibrand warned that if stablecoins continued to pay interest directly to holders, traditional banks might lose relevance.
Unlike banks, stablecoins can provide instant access to funds, low transaction fees, and fewer limitations. If they were allowed to offer returns on top of that, there would be little reason to keep money in a savings account.
The law draws a clear boundary. Stablecoins can be used to send and store money, but not to earn from it.
This affects retail users, institutions, and crypto-native investors who have relied on stablecoin yield to preserve the value of their funds in a high-inflation environment. For many, this change will require a new approach.
With fewer regulated paths to earn income on stablecoins, attention may shift back to decentralised platforms.
These protocols are not managed by companies or custodians and are therefore not directly affected by the new law. Instead, they run on open-source smart contracts and continue to provide lending and staking services to anyone with an internet connection.
Why Ethereum Remains the Primary Destination for Yield
Ethereum remains the most widely used blockchain for decentralised finance. Protocols such as Aave, Compound, and Lido allow users to lend, borrow, and stake tokens without relying on a bank or a centralised exchange.
The interest offered on these platforms comes from real activity, borrowing demand, staking rewards, or network participation, not from a company managing pooled funds.
With regulated stablecoin yields now unavailable, these decentralised services may become more appealing again. A user can deposit USDC into a lending pool on Aave, for example, and earn interest paid by borrowers.
They can also stake ETH through Lido and receive returns from validator rewards. These activities continue to function regardless of changes in US policy, because they are based on code rather than a central decision-maker.
Ethereum also offers strong infrastructure for users seeking more control. The network supports composable systems, which means users can move between different DeFi applications without needing to leave the ecosystem.
A person could borrow assets on one protocol, swap them on another, and stake them elsewhere, all within one session. This flexibility makes Ethereum more practical for managing capital than platforms with fixed systems and strict access rules.
The shift in regulation may also prompt larger institutions to reconsider their involvement with decentralised finance. Pension funds, asset managers, and other firms often seek reliable ways to earn returns, especially in environments where interest rates remain low.
If stablecoins are no longer a viable option, Ethereum’s DeFi protocols may become an alternative worth exploring, especially as tools for custody and compliance continue to improve. Ethereum’s current upgrades are also making the network more usable.
With Layer 2 solutions like Arbitrum and Optimism reducing transaction costs, and ongoing developments such as proto-danksharding increasing scalability, access to DeFi is becoming more efficient. This lowers the barrier for both individual users and institutions.
While using decentralised platforms comes with risks, such as price volatility, smart contract bugs, or changes in protocol behaviour, the fact remains that they are among the few remaining places where users can earn yield on their digital assets. With stablecoins no longer offering interest, DeFi provides a clear alternative.
Conclusion
The GENIUS bill marks a turning point in how stablecoins are regulated in the United States. By removing the ability to earn yield from regulated tokens, the law forces users to consider new options.
Ethereum’s DeFi ecosystem, with its open structure and active development, remains a practical choice for those looking to earn on their digital assets. While not without risks, it continues to offer tools that users cannot access elsewhere.
The restrictions placed on stablecoins may limit certain behaviours, but they also highlight the ongoing relevance of decentralised systems that remain open and accessible to all.
Editor: Lydicius