Congress is explicitly forbidding stablecoins from paying interest, a tactical victory for the banking lobby. The newly passed Genius Act and the pending Clarity Act mandate that dollar-pegged tokens like USDC must be backed 1:1 by assets like Treasury bonds, but issuers cannot reward holders with yield. On The Bitcoin Podcast, Corey explained this design strips stablecoins of features that would classify them as bank deposits or securities, letting them operate as pure payment tools under lighter oversight.
This legislative pivot ends an era of regulation by enforcement. For years, the SEC and CFTC policed crypto through one-off lawsuits, leaving builders in legal limbo. The new acts create a codified rulebook, what one host called a ‘zoning law’ for crypto. This predictability is the real product for institutional capital. Large financial institutions, including big tech companies now allowed to issue stablecoins, won’t build on a foundation an agency chief can unwind with a memo.
"Congress is drawing a hard line between payment rails and banking. If a stablecoin pays you to hold it, the government views it as a bank deposit or a security."
- Corey, The Bitcoin Podcast
Stablecoin issuers are accepting the trade-off. Circle CEO Jeremy Allaire recently cited a "moral quandary" when refusing to freeze $230 million in USDC after the Drift Protocol exploit, arguing he needed a court order. Yet, as noted on Bitcoin And, Allaire simultaneously lobbies for the Clarity Act to grant issuers a legal “safe harbor” to freeze funds. These corporate layers represent a vulnerability for sovereignty-seekers but a necessary compromise for mainstream survival.
The pragmatic shift extends beyond regulation. Founders are abandoning peer-to-peer purity for centralized architecture to achieve performance and legal safety. Jesse on The Bitcoin Podcast acknowledged the need to build centralized software for commercial viability, even if it deviates from cypherpunk ideals. The revolution is being built on the very infrastructure it intended to replace, with yield now firmly gated by traditional finance.
