Will the "GENIUS Act" once again give rise to a "DeFi Summer"?

What do these latest developments in the global value transfer sector mean?

Written by: Blockchain Knight

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If 2024 is the “Year of the Dragon,” then 2025 will be the “Year of Stablecoins.” Especially, digital assets backed by the US dollar have become the focus, even receiving recognition from the highest levels.

In March this year, the DeFi platform controlled by the Trump family launched the World Liberty stablecoin USD1. In May, Vice President JD Vance spoke at the Bitcoin conference, clarifying the government’s positive stance on stablecoins, believing they could become a “force multiplier for America’s economic strength.” This statement ignited the audience.

Subsequently, the stablecoin issuer Circle completed a $20 billion IPO, triggering what the duo on the Bankless podcast described as the “Summer of Stablecoins.” Last week, the GENIUS Act was officially signed into law, becoming the first legislation in the U.S. to directly regulate digital assets and marking a turning point for global finance.

Even Jamie Dimon, who personally harbors skepticism towards cryptocurrencies, has joined this initiative. Although he has publicly stated that he does not understand the appeal of cryptocurrencies, there has long been a gap between his words and actions: this largest American bank has already been a pioneer in blockchain technology, developing its own stablecoin, JPM Coin, since 2019.

So, what do these latest developments in the field of global value transfer mean? What impact does the “GENIUS Act” have on the future of cryptocurrency, traditional finance (TradFi), and the global economy? I have invited experts from the fields of technology, law, and finance to elaborate on this and analyze the technological advancements that may emerge in the coming years.

Core Summary: What is the “GENIUS Act”?

If you have been isolated from the world, let me guide you out of the fog. The full name of the “GENIUS Act” is the “Guiding and Establishing National Innovation for U.S. Stablecoins Act of 2025,” but the term “GENIUS” is more catchy. This is the first federal law in the United States to comprehensively regulate “payment stablecoins” (i.e., digital tokens pegged to fiat currency).

The “GENIUS Act” establishes a long-awaited licensing and regulatory framework for stablecoin issuers, requiring that stablecoins be backed by full reserves on a 1:1 basis, implementing strict consumer protection measures, and laying a clear legal foundation for the integration of stablecoins into the mainstream financial system.

The law also prohibits non-financial companies like Facebook and Google from issuing stablecoins without special approval, imposing severe penalties for violations (violators may face fines of up to $200,000 per day, and criminal penalties include up to 5 years in prison).

Why is the “GENIUS Act” so important? Because in the United States, stablecoin issuers have been operating in a regulatory gray area and uncertainty for years, and this act provides a federal legal framework for the first time, clarifying operational standards. As noted in a recent blog by the international law firm Winston & Strawn LLP:

“The bill will bring stablecoin issuers under a banking regulatory framework. For many businesses, this means hiring compliance officers, investing in risk management systems, and possibly collaborating with experienced regulatory bodies to meet the standards set by Congress.”

The founder of the rapidly growing crypto investment fund Moon Pursuit Capital, Utkarsh Ahuja, shared his views on the groundbreaking significance of the GENIUS Act:

“The ‘GENIUS Act’ is not only a significant advancement in the cryptocurrency field but also an important step for the United States in asserting its leadership in the global financial arena. For the first time, we have established clear rules for stablecoins, which are at the core of an open, programmable currency infrastructure. For a long time, regulatory uncertainty has hindered industry development, forcing developers to turn overseas. This act changes that situation by providing legal clarity for stablecoins and laying the groundwork for broader applications of cryptocurrencies.”

Genna Garver, a partner at the international law firm Troutman Pepper Locke LLP, also shared her views with CryptoSlate readers:

“This is a watershed moment for institutional financial services. The ‘GENIUS Act’ authorizes the tokenization of fiat currencies and related regulation, thereby legitimizing the digitization of the dollar.”

The Perfect Storm of Digital Assets: Comprehensive Upgrade in Favorable Conditions

Alchemy is a developer platform that handles over $100 billion in transactions each year for businesses within the ecosystem, ranging from Fortune 500 companies like Robinhood, Visa, JPMorgan, and PayPal to crypto-native businesses like Coinbase and Circle. Its Chief Technology Officer, Guillaume Poncin, stated in written comments:

“The “GENIUS Act” brings much-anticipated clarity for institutions, facilitating the legalization of programmable currency at internet speed. The importance of this legislation lies in its reduction of regulatory uncertainty that hinders institutional adoption.”

In addition, the introduction of the “GENIUS Act” is not an isolated event. The current government’s support for digital assets is on the rise, fully upgrading in the right direction. The gradual easing of cryptocurrency repression during Biden’s administration, along with the repeal of restrictive legislation such as SAB 121, which prohibited U.S. banks from providing digital asset custody services, has collectively created a perfect storm. Poncin excitedly stated:

“We have seen large banks that previously held a cautious attitude immediately show interest. Now, with the implementation of the ‘GENIUS Act’, we believe that all large banks will issue or support stablecoins in some form. This will usher in a new era of programmable currency, which is trustworthy, regulated, and designed for internet-scale speed.”

The bill will also strengthen the dominance of the dollar, promote dollar-based innovation, and consolidate the dollar’s status as a global reserve currency for decades to come. Chris Perkins, president of the crypto-native investment firm CoinFund, commented:

The “GENIUS Act” will go down in history as a foundational law that drives cryptocurrency to become a mainstream asset class. By catalyzing innovation in America’s most essential export product—the US dollar—this act will ensure the dollar maintains its status as the global reserve currency for decades to come, enhance national security, and unlock financial opportunities worldwide.

Stablecoins offer significant practicality by providing low-cost, 24/7 payment services. Additionally, by providing seamless and efficient access to US dollars for developing countries, stablecoins can also serve as a store of value when local monetary policies fail.

Stablecoin “Killer Applications” Emerge

The use of stablecoins has far exceeded the initial purpose of being a “wealth storage tool to avoid the volatility of digital assets like Bitcoin and Ethereum” and is now recognized as a key financial infrastructure by landmark legislation. So, what major application scenarios will the “GENIUS Act” give rise to? What can we expect in the coming years? Ahuja commented:

“The ‘GENIUS Act’ will unlock true innovation, including instant remittances, AI-native payments, and intermediary-free global trade.”

Poncin added: “The opportunity of stablecoins does not lie in holding them, unless they are used in DeFi for earning returns. The real opportunity is for companies to issue their own stablecoins, such as payment processors integrating stablecoins and fintech companies launching their own tokens.”

We see that fintech companies generate substantial income from the management of funds from stablecoin reserves. With a deposit scale of 2-3 billion dollars, the potential annual income can exceed 100 million dollars. The true value creation of stablecoins lies in how they empower the new financial system.

In addition to attempting to issue its own stablecoin, JPMorgan has made headlines this week for allowing clients (especially institutional clients) to use Bitcoin as collateral for loans. Thanks to the GENIUS Act, the bank is developing new plans that allow clients to pledge Bitcoin or Ether to obtain cash loans, similar to the model of using stocks or real estate as collateral.

Although JPMorgan has allowed clients to borrow against crypto ETFs, accepting direct crypto assets as collateral remains a paradigm shift for institutions led by some of the industry’s most outspoken critics.

The impact of the “GENIUS Act” extends across the entire industry, with DeFi platforms and tokenized RWA also receiving significant attention. Orest Gavryliak, Chief Legal Officer of DEX aggregator 1inch Labs, stated:

“Tokenization technology has become a core focus for traditional financial giants such as BlackRock and JPMorgan, as it significantly optimizes the current financial standard system while greatly enhancing liquidity accessibility. Leveraging blockchain technology, tokenization breaks geographic limitations, allowing fragmented markets with limited liquidity to be integrated and providing real-time access to global 24/7 multi-source liquidity.”

Poncin further explained: “Banks will provide clients with ‘institutional-level opportunities’, such as private equity transactions and lending through holdings. Small businesses will ultimately be able to leverage the advantages of the remote work era to pay overseas employees’ salaries at a low cost. What we are about to witness is not one, but hundreds of stablecoin ‘killer applications’ emerging, which will empower value exchange and creation in ways that were unimaginable just months ago.”

Tokenized government bonds are experiencing significant growth. Stablecoin issuers like Tether hold a large amount of U.S. debt. We are seeing increased market interest in the tokenization of traditional illiquid assets such as private credit and real estate, in order to unlock liquidity. At the same time, the infrastructure that allows RWA to be composable with DeFi protocols is also continuously evolving. The real innovation lies in making these assets programmable, which will give rise to new financial products, such as automated lending based on tokenized assets or smart contracts that can interact with real-world collateral.

Will the “GENIUS Act” Give Rise to a “Super DeFi Summer”?

One interesting provision in the “GENIUS Act” is the prohibition of paying interest or yields to stablecoin holders, which could trigger a surge in demand for DeFi yield opportunities. Perkins stated:

According to the “GENIUS Act”, stablecoins do not pay interest to end users, making them depreciating assets. Holders will seek returns, which is exactly where DeFi comes into play. If the Treasury’s predictions are correct, trillions of dollars in stablecoins will enter the market, leading us to a “Super DeFi Summer” as users maximize returns through various yield strategies. Users will be attracted by yield-generating vaults and will delegate AI agents to optimize returns.

As the United States regains its leading position, countries around the world will have to accelerate the optimization of their own stablecoin policies. The $75 trillion foreign exchange market will benefit from this. Please pay close attention to this field.

Will Beeson, founder of MultiLiquid and former co-head of Standard Chartered’s tokenization platform, commented: “A comprehensive ban on stablecoin yields marks a critical turning point. Capital has begun to shift. Ethereum is outperforming Bitcoin as traders seek returns through Ethereum’s native protocols and tokenized funds.”

The stablecoin market is entering a new phase, where only institutions that can efficiently utilize capital will survive. However, there is a bottleneck: stablecoins can operate 24/7, while government bonds cannot. Bridging this gap with liquidity infrastructure has now become a core priority.

Gavryliak added: “The regulatory clarity brought by the ‘GENIUS Act’ enables businesses and institutions to utilize stablecoins for fast, low-cost cross-border payments, capital optimization, and real-time settlements, bypassing traditional financial banking channels and unleashing operational efficiency. This is a positive advancement for DeFi.”

It also provides guarantees for institutions and other traditional financial participants, allowing them to fully invest in this field. Institutions that had previously only tested the waters can now fully enter under a clear framework.

Will politics hinder this revolution?

As digital assets increasingly become a partisan issue, and with core Democrats like Elizabeth Warren still leading the anti-crypto camp, if the Democrats regain power, is the “GENIUS Act” or other related legislation at risk of being repealed? Additionally, the Trump family clearly benefits from digital assets; does this apparent conflict of interest pose a threat? Poncin believes it is too late:

“The momentum of cryptocurrency adoption transcends political divides. We collaborate with institutions across various fields, all of which recognize the potential of blockchain. The repeal of SAB 121 has bipartisan support, with cryptocurrency advocates in both parties. Major banks, asset management firms, and payment companies are all positioning themselves in the blockchain space, as it offers superior technology for settlement and programmable currency.”

In addition, the cryptocurrency industry has demonstrated resilience amid various challenges over the years. The key is that institutions are building real utility on the blockchain, with these application scenarios addressing real issues such as settlement speed, operational costs, and 24/7 availability, which is the driving force behind sustained adoption.

Garver is also optimistic about the lasting changes brought by the “GENIUS Act”: “During the legislative process, there were several attempts to debate and propose amendments regarding conflicts of interest, but these amendments were not included in the final bill. Now, the final legislation allowing the use of stablecoins has been enacted, and the adoption of digital assets may depend more on the application scenarios.”

Similar to the widespread adoption of the previous generation of ATMs, when a technology is convenient and beneficial enough, people will eventually accept it. I don’t believe potential users will hesitate due to protests. I believe the trend is irreversible, and cryptocurrencies will quickly integrate into the core of the U.S. economy, the global economy, and the financial services industry.

In the face of global debt expansion, liquidity expansion, geopolitical uncertainty, and declining interest rates, the United States’ friendly regulation of digital assets may mean that “this train is unstoppable.” As Ahuja emphasized:

“To be frank, from the perspective of addressing risk events such as tariff resolutions or escalations in the Middle East, this is the most constructive macro environment you can ask for. However, from a purely market structure and liquidity standpoint, the conditions are ripe.”

We are entering a rare window period where the fundamentals, liquidity, and macro dynamics are all improving, and this is the moment to unlock the greatest upside potential.