People in the industry like Andrei Grachev argue it could legitimize stablecoins as financial instruments and serve as a cornerstone for a global, programmable financial system. However, some people like Bitget’s Vugar Usi Zade warn that the bill could hurt US-based issuers by placing them at a regulatory disadvantage against dominant offshore players like Tether. The rise of yield-bearing stablecoins also triggered pushback from traditional banks, who are accused of lobbying to block interest payments on stable assets. Meanwhile, Hong Kong passed its own fiat-backed stablecoin legislation, opening the door to licensed issuance by year-end. GENIUS Act Advances Stablecoin Legitimacy The adoption of stablecoins by institutional investors could be poised for massive growth as the United States Senate moves forward with its landmark bill to regulate the sector. The Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act aims to create a clear legal framework for stablecoin collateralization and enforce Anti-Money Laundering compliance. It advanced past a 66–32 procedural vote on May 20 and will now proceed to full Senate debate. The GENIUS Act is a big step toward mainstream acceptance of stablecoins. Industry leaders like Andrei Grachev, managing partner at DWF Labs and Falcon Finance, believe the bill goes beyond regulation and effectively legitimizes stablecoins as financial instruments. In a Chain Reaction X Spaces interview on May 20, Grachev said that the clarity provided by the legislation could be the confidence booster institutions have been waiting for. According to him, stablecoins have moved beyond the experimental stage and now offer a superior alternative to traditional fiat money by delivering benefits in speed, simplicity, and transparency. Grachev also described the GENIUS Act as potentially the first building block of a more unified digital financial system that is borderless, programmable, and efficient. He noticed that when the US moves on digital asset policy, the global market tends to follow. Co-sponsor of the bill, Republican Senator Cynthia Lummis, indicated that Memorial Day could be a realistic timeline for the bill’s passage. However, Grachev still warned that regulatory clarity alone will not be enough to trigger widespread institutional adoption. He specifically brought up the need for products that offer stable and predictable yield, and pointed to Falcon Finance’s development of a synthetic yield-bearing dollar product that is tailored for this purpose. On the other hand, not all voices in the industry are entirely satisfied with the bill. Vugar Usi Zade , COO of the Bitget exchange, pointed out that the GENIUS Act does very little to address the influence of offshore stablecoin issuers like Tether, which continue to dominate global liquidity markets. He warned that increased regulatory burdens could place US-based issuers at a disadvantage, and could potentially drive market consolidation and favor larger firms that can afford to meet compliance demands. Despite these criticisms, Zade conceded that the legislation could introduce greater stability to the US stablecoin market if its provisions are implemented effectively. Stablecoins Threaten Bank Monopoly Meanwhile, the rise of yield-bearing stablecoins is igniting tensions between traditional banks and the crypto industry, and critica are accusing the banking sector of lobbying to protect its monopoly on interest-bearing financial products. Austin Campbell , a professor at New York University and founder of Zero Knowledge Consulting, warned in a May 21 social media post that the powerful American banking lobby is ”panicking” over stablecoins' growing ability to disrupt conventional financial services—particularly those that offer yield. Campbell’s post was titled “The Empire Lobbies Back,” and it criticized the banking industry’s efforts to sway lawmakers into opposing interest-paying stablecoins. He mostly directed his comments at Democratic policymakers, and argued that banks are seeking protectionist policies under the guise of safeguarding consumers, while in reality trying to maintain their hold on a system that offers depositors minimal returns. He pointed out that fractional reserve banking allows banks to profit immensely while giving customers very little back, and stablecoins offering interest threaten this model. He also said that the claim stablecoin interest payments would ”harm” banks is little more than an appeal for cartel protection. Campbell urged lawmakers not to back any form of legislation that imposes a blanket ban on stablecoin yield, and warned that doing so would serve banks at the expense of everyday voters. He has been a longtime advocate for practical and transparent stablecoin regulation in the United States and previously warned a Congressional subcommittee in 2023 that failure to pass legislation will push innovation offshore. His comments were made as yield-bearing stablecoins are gaining more traction in the market. In February, the US Securities and Exchange Commission (SEC) approved the first stablecoin security to offer yield, which was Figure Markets’ YLDS token, which pays 3.85% interest. Since then, other initiatives followed suit. Tether co-founder Reeve Collins introduced the Pi Protocol’s USP stablecoin, which is minted in exchange for an interest-bearing counterpart called USI. Meanwhile, Spark Protocol's USDS stablecoin distributes interest derived from decentralized lending and tokenized Treasury products. Industry voices argue that it is no longer acceptable for stablecoin holders not to receive at least the equivalent of the risk-free rate on their assets. Spark Protocol CEO Sam MacPherson explained to Bloomberg that fair yield is a necessary evolution in stablecoin utility. Growth of stablecoins (Source: S&P Global ) According to Coinbase Canada CEO Lucas Matheson , global stablecoin volumes now surpass those of traditional payment giant Visa by a factor of nearly three. For now, the fight over who controls access to interest-bearing products is escalating. Hong Kong Passes Stablecoin Bill Hong Kong officially passed its Stablecoin Bill, which is a major step toward establishing itself as a global hub for digital assets and Web3 development. The region’s Legislative Council approved the bill on its third reading. According to council member Johnny Ng Kit-Chong , the legislation sets the foundation for a regulated framework that will allow major institutions to apply for stablecoin issuer licenses with the Hong Kong Monetary Authority by the end of the year. The bill requires that all stablecoins be backed by fiat currency reserves for investor protection and to ensure the integrity of the digital asset ecosystem. In his announcement, Ng extended a welcoming message to global enterprises that are interested in issuing stablecoins in Hong Kong, and even offered personal assistance to facilitate introductions and strategic partnerships. Ng said that this legislative milestone is just the beginning of a broader push to develop real-world applications for Web3 technologies. He believes stablecoins will play a crucial role in modernizing payment systems, enabling more efficient cross-border transactions, and empowering peer-to-peer commerce. He also advocated for sharing interest earnings with stablecoin holders, and framed it as both an innovation and a tool to enhance financial market stability. With this bill, Hong Kong positions itself as a first mover in the Asia-Pacific region.
