Crypto Pushes Yield Boundaries With GENIUS Act Stalled

The GENIUS Act , which aims to regulate stablecoins in the United States, was enacted on July 18.

However, the policy hasn’t yet been implemented, leaving cryptocurrency firms, stablecoin issuers and would-be stablecoin issuers in limbo.

The reason for the holding pattern? The act’s most important provisions cannot function until the U.S. Department of the Treasury releases implementing regulations covering reserve composition, disclosures, affiliate relationships and the precise definition of “yield.”

That vacuum is now producing follow-on consequences. Arrangers, banks, FinTech lenders and crypto-native issuers are racing to test the boundaries of the statute before regulators have locked down the guardrails and their corresponding definitions.

Anchorage Digital , for example, reportedly announced Tuesday (Nov. 25) that it aims to offer stablecoin rewards through a legally distinct affiliate, insisting that this structure complies with the GENIUS Act’s prohibitions on yield.

Anchorage may have opened a path that other stablecoin issuers, including nonbanks, could seize before the Treasury Department finalizes rules. Sen. Mike Rounds of South Dakota reportedly said the Senate has embraced the position that any attempt to revisit the GENIUS Act’s language and framework by lawmakers will have to wait until after implementation by federal agencies.

The move might have far-reaching implications for the banking industry, which is trying to stop stablecoin issuers from offering yield and has aggressively campaigned on the issue.

Read also: Bitcoin-Backed Stablecoins Top List of GENIUS Act Loopholes

Traditional Banking’s Fight Against Stablecoin Yield

The GENIUS Act was intended to stabilize the U.S. stablecoin ecosystem by clarifying roles, responsibilities and risks. Yet its most consequential provisions now hinge on definitions that do not yet exist. In that vacuum, Anchorage’s affiliate-reward model may be the first in a wave of industry innovation testing the law’s boundaries.

The prospect of stablecoins offering yield is, in many ways, a challenge to banks’ core business model. If consumers can hold a tokenized dollar fully backed by Treasuries, transferred in real-time across networks, and potentially earn a yield equivalent to or better than a savings account, it could spark deposit drain across local and regional lenders more sensitive to the flight of their customer accounts than larger institutional lenders.

The GENIUS Act represented a partial win for banks. Congress banned stablecoin issuers from paying yield directly. However, banks say that unless regulators take an expansive interpretation of yield, affiliate structures could become a loophole big enough to reshape the deposit market.

The Treasury Department responded to the new law by issuing a request for public comment in September, posing some 58 questions on topics ranging from reserve composition and redemption practices to the meaning of “pay,” “interest,” “yield,” and “solely” under Section 4(a)(11).

Industry groups such as the American Bankers Association , the Bank Policy Institute and the Consumer Bankers Association have pressed senators to prohibit any yield-related incentives tied to stablecoin holdings, regardless of the corporate separation. They have also lobbied the Office of the Comptroller of the Currency and the Federal Reserve to issue guidance discouraging banks from partnering with stablecoin programs that engage in yield-adjacent products.

PYMNTS reported separately that banks have their own efforts to enter the stablecoin custody space, and these lenders are “planting flags in a future financial architecture where tokenized assets and stablecoins become mainstream.”

See also: Stablecoins, Not FinTechs, Are Forcing Community Banks to Rethink the Future

Broader Implications for Banks, FinTech and Crypto

For many stakeholders across the financial services space, the GENIUS Act was never intended to turn stablecoins into savings accounts. By using affiliates to pay yield, or something that in practice may resemble yield, stablecoin issuers could risk undoing the very safeguards Congress tried to build, including separation of banking and commerce, deposit-base integrity and consumer protection.

Traditional banks see these early moves as a quiet warning that stablecoin competition could soon reach their core business lines. FinTechs may see an opportunity to differentiate. Crypto natives could see legal gaps ripe for exploration. Neobanks, for their part, may see a chance to blend stablecoin liquidity with consumer-friendly rewards in ways traditional institutions cannot match.

This scenario underscores the broader tension. The GENIUS Act was designed to protect banking stability while fostering payments innovation. But in the interim, it may be encouraging the very competitive dynamics banks hoped to avoid.

As the Treasury Department writes the rules, the market is already writing the future. The next year will reveal whether affiliate-based stablecoin rewards become a temporary curiosity, a meaningful loophole or the beginning of a new competitive era in digital money.