GENIUS Act’s Potential Impact on Stablecoins Explored

Matrixport announces the expected prohibition of interest payments on stablecoins through the ‘GENIUS Act,’ impacting fund allocation to yield alternatives like tokenized money market funds.

The potential shift in fund allocation is leading to reduced stablecoin liquidity, driving investments towards traditional safe-haven assets and altering market dynamics.

GENIUS Act’s Ripple Effect on Stablecoin Market

Funds exiting stablecoins are reportedly moving into traditional safe-haven assets such as gold and silver. The potential reduction in liquidity could weaken short-term crypto purchasing power. Circle, whose USDC is a major stablecoin, is shifting its focus, reportedly moving from market capitalization to trading activity.

Community and industry responses to these developments have been mixed. Some analysts view the potential prohibition on interest payments as an opportunity for alternative assets, whereas others see it as a threat to stablecoin utility. Circle’s partnerships, like the one with Intuit, aim to bolster stablecoin payment use. According to the Brookings Institute, “The GENIUS Act restricts stablecoin issuance to insured depository institutions, requiring a 1:1 reserve in low-risk assets.”

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According to CoinMarketCap, USDC holds a price of $1.00 and a market cap of $71.60 billion with dominance of 2.37%. Its 24-hour trading volume reached $22.70 billion, reflecting a 73.55% increase, but its price changed -0.02% in 24 hours, showing limited volatility.

Historical Parallels and Strategic Shifts in USDC

Did you know? The GENIUS Act’s impact could mirror Hong Kong’s May 2025 Stablecoin Ordinance, which mandated HKD-backed stablecoins to hold licenses and AML/CFT compliance.

The Coincu research team suggests that the GENIUS Act’s potential prohibition on interest yields may steer stablecoin issuers to prioritize compliance and innovation in payment solutions over yield offerings. This shift could lead to further collaborations and technological advancements in stablecoin infrastructure.

The Coincu research team suggests that the GENIUS Act’s potential prohibition on interest yields may steer stablecoin issuers to prioritize compliance and innovation in payment solutions over yield offerings. This shift could lead to further collaborations and technological advancements in stablecoin infrastructure.