Colin Butler of Mega Matrix and Andrei Grachev of Falcon Finance warned that the recently enacted GENIUS Act ban on interest for payment stablecoins could push capital out of regulated US markets. They said this shift would occur because yield-seeking investors will follow higher returns offshore or into opaque products.
Butler said banning yield would not shield the US financial system and would sideline compliant institutions. “There’s always going to be demand for yield,” he told reporters.
The GENIUS Act requires payment stablecoins such as USDC to be fully backed by cash or short-term Treasuries and bars them from paying interest directly to holders. (Ed. note: three-month U.S. Treasuries yield about 3.6% while many bank savings rates remain near zero.)
Grachev warned that limiting onshore yield could create demand for so-called synthetic dollars that mimic parity through trading strategies. “The real risk isn’t synthetics themselves – it’s unregulated synthetics operating without disclosure requirements,” he said.
Butler cited Ethena and its USDe product as an example of a yield-bearing instrument that uses delta-neutral strategies and lies outside GENIUS Act definitions. “If Congress is trying to protect the banking system, they have inadvertently accelerated capital migration into structures that are largely offshore, less transparent, and completely outside US regulatory jurisdiction,” he added.
The analysts also warned the US risks losing competitiveness to interest-bearing digital currencies abroad, including China’s digital yuan and initiatives in Singapore, Switzerland and the UAE. Senator Cynthia Lummis published a related post on the topic.
