Will the GENIUS Act bring about another DeFi Summer?

By: Blockchain Knights

Welcome to Slate Sundays, a new weekly column from CryptoSlate that features in-depth interviews, expert analysis, and thought-provoking commentary that goes beyond the headlines to explore the ideas and voices shaping the future of crypto.

If 2024 is the Year of the Dragon, then 2025 is the Year of Stablecoins. Dollar-backed digital assets, in particular, have taken center stage, even gaining recognition at the highest levels.

In March, the Trump family-controlled DeFi platform launched the World Liberty stablecoin USD1. In May, Vice President JD Vance spoke at a Bitcoin conference, clarifying the administration’s positive stance on stablecoins as a “force multiplier of American economic strength.”

Then, stablecoin issuer Circle completed a $20 billion IPO, sparking what the Bankless podcast duo called the “Summer of Stablecoins.” Last week, the GENIUS Act was signed into law, becoming the first US legislation to directly regulate digital assets, marking a turning point for global finance.

Even Jamie Dimon, a personal crypto skeptic, has joined the action. While he has publicly stated that he does not understand the appeal of cryptocurrencies, there is already a gap between words and actions: the largest US bank has long been a pioneer in blockchain technology and has been developing its own stablecoin, JPM Coin, since 2019.

So what do these latest developments in the global value transfer space mean? What does the GENIUS Act mean for the future of cryptocurrencies, traditional finance (TradFi), and the global economy? I asked experts in technology, law, and finance to explain this and analyze the technological advances that may occur in the coming years.

Core Summary: What is the GENIUS Act?

If you have been in a state of isolation, let me help 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 word "GENIUS" is more catchy. It is the first federal law in the United States to comprehensively regulate "payment stablecoins" (digital tokens pegged to fiat currencies).

The GENIUS Act establishes a long-awaited licensing and regulatory framework for stablecoin issuers, requires stablecoins to be fully backed by reserves 1:1, implements strict consumer protection measures, and lays a clear legal foundation for the integration of stablecoins into the mainstream financial system.

The law also prohibits non-financial companies such as Facebook and Google from issuing stablecoins without special approval, and imposes severe penalties for violations (violations can be fined 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 subject to regulatory ambiguity and uncertainty for many years, and this bill provides a federal legal framework for the first time and clarifies operating standards. As international law firm Winston & Strawn LLP stated in a recent blog:

"The bill brings stablecoin issuers under a bank-like regulatory regime. For many firms, this means hiring compliance officers, investing in risk management systems, and potentially working with experienced regulated institutions to meet the standards set by Congress."

Utkarsh Ahuja, founder of fast-growing crypto investment fund Moon Pursuit Capital, shared his thoughts on the groundbreaking significance of the GENIUS Act:

"The GENIUS Act is not only a major step forward for the cryptocurrency space, but also an important step for U.S. leadership in global finance. For the first time, we have established clear rules for stablecoins, which are at the heart of open, programmable money infrastructure. For a long time, regulatory uncertainty has hampered the industry and forced developers to look overseas. This bill changes that by providing legal clarity for stablecoins and laying the foundation for wider adoption of cryptocurrencies."

Genna Garver, partner at international law firm Troutman Pepper Locke LLP, also told CryptoSlate Reader shared her perspective:

“This is a watershed moment for institutional financial services. The GENIUS Act legitimizes digital dollarization by authorizing fiat tokenization and related regulation.”

A Perfect Storm for Digital Assets: Tailwinds Are Upgraded

Alchemy is a developer platform that processes over $100 billion in transactions per year for businesses in the ecosystem, from Fortune 500 companies like Robinhood, Visa, JPMorgan Chase, PayPal, to crypto-native companies like Coinbase and Circle. Its CTO Guillaume Poncin said in written comments:

“The GENIUS Act brings long-awaited clarity to institutions, helping to legitimize programmable money at internet speeds. The importance of this legislation is that it reduces regulatory uncertainty that has hindered institutional adoption.”

Moreover, the introduction of the GENIUS Act is not an isolated incident. The current momentum of government support for digital assets is high, and the tailwinds are upgraded. The gradual lifting of the clampdown on cryptocurrencies during the Biden administration, and the repeal of restrictive legislation such as SAB 121, which prohibited US banks from providing digital asset custody services, have created a perfect storm. Poncin said excitedly:

"We saw immediate interest from large banks that were previously cautious. 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 money that is trusted, regulated, and built for Internet-scale speeds."

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

“The GENIUS Act will go down in history as the foundational law that has propelled cryptocurrencies into a mainstream asset class. By catalyzing innovation in America’s most core export, the dollar, the bill will keep the dollar as a global reserve currency for decades to come, enhance national security, and unlock financial opportunities for the world.

Stablecoins have clear utility by providing low-cost, 24/7 payment services. In addition, by providing developing countries with seamless and efficient access to dollars, stablecoins can also serve as a store of value when local monetary policy fails.”

Stablecoin “killer applications” emerge

The use of stablecoins has far exceeded the initial “wealth storage tool to avoid the volatility of digital assets such as Bitcoin and Ethereum” and has now been recognized as critical financial infrastructure by the landmark bill. So, what major use cases will the GENIUS Act give rise to? What can we expect in the coming years? Ahuja commented:

“The GENIUS Act will unlock real innovation, including instant remittances, AI-native payments, and global trade without intermediaries.”

Poncin added: “The opportunity for stablecoins is not to hold them, unless they are used to earn yield in DeFi. 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 are seeing fintech companies earn significant revenue from stablecoin reserves through fund management. At a deposit scale of $2-3 billion, the potential revenue can reach more than $100 million per year. The real value creation of stablecoins is how they enable the new financial system.”

In addition to trying to issue its own stablecoin, JPMorgan Chase 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 a new program that allows customers to pledge Bitcoin or Ethereum to obtain cash loans, similar to the model of using stocks or real estate as collateral.

While JPMorgan already allows clients to borrow and lend through crypto ETFs, accepting direct crypto assets as collateral is still a paradigm shift for an institution led by the industry’s most vocal critic.

The impact of the GENIUS Act is industry-wide, with DeFi platforms and tokenized RWAs also in the spotlight. Orest Gavryliak, Chief Legal Officer of 1inch Labs, a pioneer in DEX aggregation, said:

"Tokenization technology has become a core focus of traditional financial giants such as BlackRock and JPMorgan Chase because it significantly optimizes the current financial standard system while greatly improving liquidity accessibility. With the help of blockchain technology, tokenization breaks through geographical restrictions, enables limited liquidity and fragmented markets to integrate, and obtain real-time 24/7 global multi-source liquidity."

Poncin further explained: "Banks will provide customers with "institutional opportunities" such as private equity transactions and borrowing through positions. Small businesses can finally take advantage of the remote working era and pay overseas employees at low cost. What we are about to witness is not one, but hundreds of stablecoin "killer applications" that will enable value exchange and creation in ways that were unimaginable a few months ago.

Tokenized Treasury bonds are growing significantly. Stablecoin issuers such as Tether hold a large amount of US debt. We are seeing a growing interest in the tokenization of traditional illiquid assets such as private credit and real estate to unlock liquidity. At the same time, The infrastructure that RWAs can be combined with DeFi protocols is also 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 lead to a "Super DeFi Summer"?

One interesting provision in the GENIUS Act is the prohibition of paying interest or income to stablecoin holders, which could trigger an explosion in demand for DeFi income opportunities. Perkins said:

"Under the GENIUS Act, stablecoins pay no interest to end users, making them depreciating assets. Holders will seek yield, and this is where DeFi comes in. If the Treasury forecast is correct and trillions of dollars in stablecoins enter the market, we will usher in a "super DeFi summer" as users maximize returns through multiple yield strategies. Users will be attracted to yield-based vaults and entrust AI agents to optimize returns.

With the United States back in the lead, countries around the world will have to accelerate the optimization of their own stablecoin policies. The $7.5 trillion daily foreign exchange market will benefit from this. Keep an eye on this space."

Will Beeson, founder of MultiLiquid and former co-head of Standard Chartered Bank's tokenization platform Commenting: “The blanket ban on stablecoin yields marks a critical turning point. Capital has begun to shift. Ethereum outperforms Bitcoin as traders seek returns through the Ethereum native protocol and tokenized funds.

The stablecoin market is entering a new phase where only institutions that can efficiently deploy capital will survive. But there is a bottleneck: stablecoins can operate 24/7, while treasuries cannot. Liquidity infrastructure to bridge this gap has now become a core priority.”

Gavryliak added: “The regulatory clarity brought by the GENIUS Act allows companies and institutions to use stablecoins for fast, low-cost cross-border payments, capital optimization and real-time settlement, bypassing traditional financial banking channels and unlocking operational efficiencies. This is a positive step forward for DeFi.

It also provides a guarantee for institutions and other traditional financial players to fully invest in this field. Institutions that previously only tested the waters can now fully participate under a clear framework.”

Will politics hinder this revolution?

With digital assets becoming an increasingly partisan issue, and core Democrats such as Elizabeth Warren still leading the anti-crypto camp, is the GENIUS Act or other related legislation at risk of repeal if the Democrats return to power? In addition, the Trump family has clearly benefited from digital assets. Does this obvious conflict of interest pose a threat? Poncin thinks it’s too late:

“The momentum of cryptocurrency adoption transcends political differences. We work with institutions in all fields, and they all recognize the potential of blockchain. The repeal of SAB 121 has a bipartisan basis, and there are cryptocurrency supporters in both parties. Large banks, asset management companies and payment companies have deployed blockchain because it provides better technology for settlement and programmable currency.

In addition, the cryptocurrency industry has shown resilience in various challenges over the years. The key is that institutions are building real utilities on blockchains. These application scenarios solve real problems such as settlement speed, operating costs, and 24/7 availability. This is the driving force for lasting adoption.”

Garver is also optimistic about the lasting changes brought about by the GENIUS Act: “During the legislative process, there were many attempts to debate and propose amendments on conflicts of interest, but these amendments were not included in the final bill. Now that the final legislation allowing stablecoin payments has been introduced, the adoption of digital assets may depend more on the application scenario.

Compared with the previous generation of ATMs Similar to the adoption of cryptocurrencies, when a technology is convenient and beneficial enough, people will eventually adopt it. I don’t think potential users will be put on the sidelines by protests. I believe the trend is irreversible and cryptocurrencies will quickly become integrated into the core of the US economy, the global economy and the financial services industry.”

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

“Frankly, this is the most constructive macro environment you can ask for in terms of addressing event-driven risks such as tariffs or escalation in the Middle East. But from a pure market structure and liquidity perspective, the conditions are ripe.

We are entering a rare window period where fundamentals, liquidity and macro dynamics are all positive, and this is the moment to unlock the biggest upside.”