The GENIUS Act Banned Your Stablecoin Yield — Here's What to Do About It
In mid-2025, a piece of legislation called the GENIUS Act quietly removed one of the most compelling use cases for holding stablecoins on a crypto exchange. If you held USDC or similar stablecoins on platforms like Coinbase, you were previously earning 3–4% annually — similar to a high-yield savings account or short-term treasury. That yield is now gone, captured by the exchanges and issuers instead.
Here's what happened, what the CLARITY Act proposes to do about it, and why neither outcome is actually good for you as a consumer.
How Stablecoin Yield Works
Stablecoins like USDC are backed one-to-one with US dollars. The company behind USDC, Circle, holds that backing in short-term US treasuries and similar instruments. Those instruments generate yield — currently in the 4–5% range depending on the rate environment.
Until 2025, exchanges like Coinbase acted as intermediaries, passing that yield on to users who held stablecoins on the platform. It was a genuinely useful feature: park your cash in USDC, earn a return similar to a CD, and have the flexibility to deploy it into crypto whenever you wanted.
What the GENIUS Act Changed
The GENIUS Act, signed into law in 2025, prohibits stablecoin issuers from passing yield directly to consumers. When exchanges tried to continue offering yield by positioning themselves as third-party intermediaries rather than issuers, regulators pushed back — ruling that a third party passing yield to consumers is functionally equivalent to the issuer doing so, and therefore prohibited.
The result: the yield that was previously flowing to consumers now stays with the issuers and exchanges. Coinbase has publicly acknowledged that this change is expected to significantly increase their profits.
What the CLARITY Act Actually Proposes
The CLARITY Act is the follow-up legislation currently working through Congress. Coinbase and Ripple have been prominent advocates for it, framing it as a pro-consumer measure. But the debate inside the CLARITY Act is not about restoring idle yield to consumers. That issue has already been settled — the crypto companies have conceded it.
What the CLARITY Act debate is actually about is whether consumers can receive rebates and rewards for performing specific actions on exchanges — trading volume thresholds, moving funds in certain ways, and similar activity-based incentives. This is materially different from yield. Yield is passive — you earn it simply by holding. Rebates require you to generate fee revenue for the exchange first.
Two Ways to Respond
If you're a US citizen and this matters to you, the CLARITY Act has not yet passed the Senate. Contacting your senators to express that you want full yield restoration — not rebates — is a concrete action that can still influence the outcome.
The second option is to bypass the system entirely. Circle and Ripple back their stablecoins with short-term US treasuries. You can purchase those same treasuries directly at TreasuryDirect.gov — no exchange fees, no intermediary, and you keep the full yield yourself. Rolling three-month treasury bills is straightforward: as each bill matures, you reinvest the proceeds into a new one. The yield goes directly to you.
The practical takeaway: holding cash as stablecoins on an exchange long-term benefits the exchange, not you. The only reason to move cash onto an exchange is if you're actively planning to buy crypto with it. For long-term crypto holdings, a structure like an iTrustCapital IRA lets you hold real cryptocurrency inside a tax-advantaged account — a structure where the regulatory framework is actually designed to benefit the account holder.
For more on how crypto exchanges work and how to evaluate them for trading, visit CryptoSchool.cc.
This article is educational and does not constitute financial or investment advice.
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