Recent stablecoin legislation has sparked controversy due to its prohibition on interest payments to holders. This may affect competitiveness in the financial market, especially regarding tokenized money funds.
Restrictions on Interest Payments
The stablecoin legislation forbids issuers from paying interest to holders. This restriction may lead to changes in the flows of capital within the digital economy as stablecoins lose one of their key advantages.
Advantages of Tokenized Money Funds
With the new law in place, tokenized money market funds may enjoy a competitive edge as they can offer yields while retaining many of the advantages associated with stablecoins, such as speed and settlement. Temujin Louie, CEO of Wanchain, noted that tokenized funds now have the same tech perks without sacrificing returns for investors.
Behind the Scenes: Banking Lobbying
Some experts suspect that banking interests are behind this legislation. For decades, banks have minimally compensated depositors; allowing stablecoins to compete on yield could threaten that model.
The GENIUS Act paves the way for stablecoins to operate more freely under U.S. law while simultaneously limiting their attractiveness due to the ban on interest payments. The question remains: will investors prioritize yield-free stablecoins or interest-bearing tokenized funds?
