GENIUS' ban on stablecoin yield will drive demand for Ethereum DeFi — Analysts

US Legislation Sparks Demand for Ethereum and DeFi

The recent GENIUS bill signed into law by US President Donald Trump has banned yield-bearing stablecoins, eliminating interest-earning opportunities for both institutions and retail traders. This move is expected to shift the focus towards Ethereum (ETH) and decentralized finance applications, which rely heavily on the Ethereum network, according to analysts.

Impact on Passive Income Generation

Crypto analyst Nic Puckrin believes that the removal of yield on stablecoins will benefit Ethereum-based DeFi as the primary alternative for passive income generation. With the dollar being a depreciating asset lacking yield, DeFi offers a way to generate yield and preserve value, especially in the face of fiat inflation. This shift could lead to what some are calling “DeFi summer” as interest-bearing opportunities become crucial for institutions and retail participants alike.

Potential Disruption to Traditional Banking

The ban on yield-bearing stablecoins has raised concerns among traditional financial institutions, as it could drive more institutional capital into the crypto space. US Senator Kirsten Gillibrand warned that the rise of these stablecoins could threaten the traditional banking sector by reducing the demand for loans and other legacy banking services. This competition could eventually displace traditional stablecoins in favor of higher-yield options, according to Tether co-founder Reeve Collins.