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The GENIUS Act, signed into U.S. law in July 2025, draws a clear line between stablecoins as a means of payments and yield products as investments. In practice, that line is the single most important regulatory development for projects developing yield-bearing stablecoins, because the law’s core principle is to make payment stablecoins behave like digital cash: fully reserved, auditable, and easy to redeem, not a product that earns interest for simply being held. Read this article to learn how yield-bearing stablecoins fit into the new reality after the GENIUS Act.
What Are Yield-Bearing Stablecoins?
Before the law analysis, let’s revisit the current landscape of yield-bearing stablecoins. These are a class of products designed to do two things at once: maintain a $1 unit of account while also distributing yield to holders. In practice, many of the most popular projects follow a dual-asset architecture. The first asset is a USD-pegged stablecoin (or synthetic dollar) intended to stay close to $1. The second is a yield-bearing token that represents a claim on the underlying stablecoin plus accumulated returns.
Typically, users mint a USD-pegged stablecoin, then stake or lock it into a savings or vault contract. In exchange, they receive the yield-bearing token, which accrues yield over time. Instead of paying interest, it is reflected in the yield-bearing token’s price that is constantly growing at a certain pace.
The yield comes from strategies employed by a protocol (issuer). Some designs rely on crypto-native arbitrage (e.g., funding or basis spreads in perpetual and futures markets), while others route backing into real-world assets like short-term U.S. Treasuries.
3 Biggest Yield-Bearing Stablecoin Projects Today
Falcon Finance (USDf / sUSDf)
In Falcon, users mint USDf synthetic dollars and stake them in the app to receive sUSDf, which accrues yield via a rising share value.
What differentiates Falcon is diversification and disclosure. Its transparency dashboard publicly breaks down reserves, backing ratio, strategy allocation, and publishes recurring third-party attestations.
Another Falcon Finance’s distinctive feature is the wide range of yield strategies, spanning from cross-exchange arbitrage to the “extreme movements” trading, which is explicitly aimed at providing high yield rate across different market cycles.
Finally, Falcon emphasizes a wide collateral set, including blue-chip crypto, stablecoins, and real-world assets (RWAs).
Ethena (USDe / sUSDe)
Ethena’s core concept is a delta-neutral synthetic dollar, USDe, created via hedging spot crypto exposure with perpetual and deliverable futures, designed to keep the stablecoin close to $1 while generating returns.
Its yield-bearing token, sUSDe, accrues rewards sourced primarily from funding and basis spreads, plus liquid asset rewards when used in backing, making its performance closely linked to derivatives market conditions.
Ethena’s model can be highly attractive when derivatives spreads are rich, but its yield profile is more sensitive to funding and basis compression.
Sky Protocol (USDS / sUSDS)
Sky’s yield-bearing stack centers on USDS and its savings wrapper sUSDS, which is essentially a tokenized implementation of the Sky Savings Rate (SSR). sUSDS as a vault token that deposits USDS into the SSR while keeping the position transferable and usable across the broader DeFi sector.
Sky reflects a “DeFi-native savings rate” approach rather than a derivatives-basis strategy.
In practical terms, Sky tends to be read as the “on-chain savings product” archetype: from deposit to receipt token to yield via the SSR mechanism.
New Rules for Payment Stablecoins: Yield, Reserves, Custody, and More
After we defined yield-bearing stablecoins, let’s now examine how the GENIUS Act affects them. The first and main clause is that, if a crypto asset wants the legal clarity and distribution advantages of being classified as a payment stablecoin, its issuer is prohibited from paying any form of interest or yield to holders for holding, using, or retaining the coin.
Grant Thornton summarizes the effect bluntly as a prohibition on issuers paying interest to stablecoin holders, effectively banning issuer-paid “yield-bearing stablecoins” within the payment-stablecoin category. DLA Piper similarly notes the new regulation expressly treats payment stablecoins as non-interest-bearing and warns that noncompliance risks losing payment-stablecoin classification.
In a nutshell, that means that issuers of stablecoins, widely used in settlement, such as Tether (USDT) or Circle (USDC) cannot offer yield on their tokens.
The GENIUS Act goes beyond merely banning yield: it standardizes what a “safe” stablecoin is supposed to look like. The law requires payment stables to be backed by reserves in a 1:1 ratio, with reserves comprising a narrow array of high-quality, liquid assets (cash, Fed balances, bank deposits, short-dated U.S. Treasuries, etc. The Act also elevates custody and reporting standards, and pushes stablecoin issuers into a space of financial institutions by introducing AML/BSA rules. Finally, GENIUS reshapes insolvency outcomes: stablecoin holders have priority claims on reserves and courts can expedite redemptions, reinforcing the idea that payment stablecoins are meant to be redeemable settlement instruments, not risky yield tokens.
What about Yield-Bearing Stablecoins?
GENIUS doesn’t eliminate yield in crypto — it relocates it. In particular, the law separates income from liquidity, pushing returns into token “wrappers” around a stable settlement asset so risks are explicit and the base layer remains simple and robust.
Legal experts admit: issuer’s yield prohibition may still allow other entities, e.g., service providers, to structure yield programs, though that creates interpretive and enforcement questions. Examples include tokenized T-bill funds, money-market tokens, or DeFi “wrapper” structures that create a yield-bearing claim on underlying assets rather than turning the payment token itself into an interest instrument.
Are Falcon Finance, Ethena, and Sky Legal under the GENIUS Act?
GENIUS doesn’t legalize or ban yield-bearing stablecoin protocols outright — it mainly creates a licensed regime for payment stablecoins in the U.S.
Legal consensus is that the new law does not explicitly prohibit third-party or affiliate arrangements where a platform pays rewards or structures a yield product around a stablecoin, creating a “yield experience” without the issuer paying it directly.
What does this mean for projects like Falcon Finance, Ethena, and Sky Protocol in practice? They manage yield products and protocol-issued synthetic dollars that are not GENIUS-compliant payment stablecoins. Their yields are distributed through staking and wrapper tokens (sUSDf, sUSDe, sUSDS), which fit the separation with the settlement stablecoins like USDT and USDC, introduced by the GENIUS Act.
Bottom Line
The GENIUS Act doesn’t just regulate yield-bearing stablecoins — it redefines them. In the U.S. regulatory landscape, a yield-bearing stablecoin increasingly means a separate yield instrument built on top of a non-yielding payment stablecoin or tokenized cash equivalent, rather than a single token that tries to be both money and a savings account. And the leading yield-bearing stablecoins fully fit the new legal definition.
