In a significant turn for the U.S. stablecoin landscape, the recently enacted GENIUS Act is exerting considerable pressure on yield-bearing programs. While the law aims to clarify regulations around stablecoin earnings, industry analysts suggest that various workarounds could help issuers maintain returns for users.
As of 2025, the stablecoin market has seen phenomenal growth, with total market capitalization skyrocketing to $297 billion—up nearly 50% from $206 billion at the start of the year, according to data sourced from DeFiLlama. Stablecoins like PayPal’s PYUSD are leveraging yield incentives to attract users, while others, such as Ethena Lab’s USDe, offer high-risk returns in a bid for market competition.
The GENIUS Act, passed in mid-July, subjects these yield programs to enhanced scrutiny. Stablecoin issuers are now under pressure to identify alternative methods of delivering returns without violating the newly established regulations. “The GENIUS Act seeks to end the semantic games surrounding stablecoin yield,” explained Rebecca Liao, CEO of Saga. She noted that historic practices of labeling returns as “rewards” or “cashback” may soon be seen differently by regulators. “If it resembles interest, it will be treated as such,” she added.
Amidst these regulatory challenges, several companies are creatively circumventing the restrictions. For instance, some issuers are routing yield through partner banking institutions or utilizing sweep accounts, which allows them to stay clear of direct interest payments. Sid Sridhar, the founder of BIMA Labs, pointed out that rebranding yield-related rewards as “payment incentives” provides further leeway. An example includes PayPal’s PYUSD, which offers a 3.7% APR via Paxos, framed as a payment rather than interest.
Hadley Stern, Chief Commercial Officer at Marinade, highlighted that this strategy could be seen as a legal workaround for the GENIUS Act. “Even though the law restricts issuers from providing direct yield, PayPal isn’t the issuer, categorizing payouts as wallet ‘rewards’ instead,” he stated. However, he cautioned that such strategies could face pushback, as banking lobbyists are increasingly advocating for tighter regulations to eliminate these avenues.
On the regulatory front, Eli Cohen, General Counsel at Centrifuge, suggested that existing partnerships between banks and brokerage firms to redirect cash deposits into interest-bearing funds shouldn’t be considered loopholes in service of yield. “Stablecoin issuers should similarly explore collaborations with providers that can offer yield for their deposits,” he maintained. Yet, he acknowledged the formidable influence of the banking lobby in Washington, which may hinder these initiatives.
As the GENIUS Act reshapes the stablecoin landscape, various companies are likely to find themselves on divergent paths. Mike Maloney, CEO of Incyt, predicted that Circle, which has prioritized compliance over yield programs, might emerge positively positioned due to its regulatory strategy. “While some major issuers face challenges to adapt, Circle’s focus on compliance sets it up well,” he noted.
In contrast, Tether might experience a contraction in its U.S. market access following scrutiny related to transparency, despite holding a balance sheet stature comparable to PayPal. Meanwhile, Ethena seeks to occupy the position left vacant by the 2022 failure of TerraUSD (UST), relying on DeFi’s global framework to offer yields without adhering to GENIUS guidelines.
As the regulatory environment continues to evolve, all eyes will be on how these stablecoin innovations fare against the backdrop of the GENIUS Act and whether they can secure sustained returns for users while navigating the complex legal landscape.
