A key provision in the newly passed GENIUS Act is aimed at stopping large tech companies and major financial institutions from gaining outsized control of the stablecoin space, according to Dante Disparte, Chief Strategy Officer at Circle.
Speaking on the Unchained podcast, Disparte referred to what he dubbed the “Libra clause” — a nod to Meta’s abandoned stablecoin project. Under the legislation, non-bank entities looking to issue dollar-backed tokens would need to create an entirely separate business unit resembling Circle’s structure rather than a traditional bank. These entities must also meet antitrust requirements and undergo review by a Treasury-led committee with veto authority over launches.
Banks are not exempt from restrictions either. Any financial institution issuing a stablecoin must do so through a dedicated legal subsidiary. The stablecoins must be kept on a balance sheet that prohibits leverage, lending, or other forms of risk-taking, Disparte noted.
According to him, the law enforces a conservative framework — even more cautious than models proposed by big players like JPMorgan. “It brings clear standards that ultimately benefit U.S. consumers, market actors, and the dollar’s global strength,” he added.
GENIUS Act Passes With Strong Bipartisan Support
The Guiding and Establishing National Innovation for US Stablecoins Act — better known as the GENIUS Act — cleared the House last week with overwhelming bipartisan support, gaining over 300 votes, including backing from more than 100 Democrats.
Disparte called the legislation a major milestone for the crypto industry, offering long-awaited legal clarity and opening the door for fair competition under U.S. regulatory oversight.
The law maintains existing state-level licensing for stablecoin issuers managing less than $10 billion in assets. However, once an issuer crosses that threshold, they must operate under a national trust bank charter.
Key features of the bill include a prohibition on interest-paying stablecoins, enhanced disclosure rules, and the introduction of criminal penalties for issuing unbacked tokens — effectively outlawing unstable models like Terra’s.
Some critics, however, worry that banning yields could hinder consumer adoption and advantage foreign competitors. Disparte argued that yield generation is better suited to decentralized finance platforms operating on top of a stable and compliant foundation.
DeFi Stands to Gain as Yield-Bearing Stablecoins Are Banned
Analysts say the GENIUS Act’s restriction on interest-paying stablecoins could shift investor focus toward DeFi protocols, particularly those built on Ethereum.
With centralized stablecoins no longer offering interest, decentralized finance may become the go-to solution for those seeking passive income onchain. Experts like Nic Puckrin and CoinFund’s Christopher Perkins predict a resurgence of activity in DeFi — potentially sparking a new “DeFi summer.”
This shift could be particularly impactful for institutions, which are under pressure to generate returns. As traditional yield options disappear, analysts expect institutional capital to increasingly flow into DeFi ecosystems — especially Ethereum, which continues to lead the sector in total value locked.
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