TL;DR
- Regulatory clampdown under the GENIUS Act has banned direct stablecoin yields, prompting investors to seek alternative staking protocols for predictable returns.
- USDe’s supply jumped 70% to 9.49 billion, and USDS rose 23% to 4.81 billion, propelling them into the third and fourth largest stablecoins by market capitalization.
- Ethena’s ENA governance token rallied nearly 60% since mid-July, while the broader stablecoin market could approach $300 billion by year-end amid renewed DeFi activity.
Since the passage of the GENIUS Act on July 18, investors have turned to yield-bearing stablecoins, leading to remarkable growth in some pegged tokens. Even though regulators have banned direct yield distributions, Ethena’s USDe and Sky’s USDS have set themselves apart by providing staking-based returns, changing expectations, and transforming the stablecoins market.
CryptoQuant’s head of research, Julio Moreno, noted that the stablecoins yield prohibition has driven investors toward staked alternatives. This shift underscores a broader appetite for stable, credit-sensitive returns amid persistent inflation concerns.
Regulatory Shift Sparks Demand for Yield
Regulators enacted the GENIUS Act to curb direct yield offerings from stablecoin issuers, aiming to bolster consumer protection and mitigate systemic risks. The law prohibits issuers from distributing interest payments, prompting tokenholders to seek alternative yield channels. As a result, protocols that enable staking or tokenized interest have become focal points for users wanting stable, inflation-resistant returns.
USDe and USDS Lead the Supply Surge
Since July 18, the circulating supply of USDe has increased by 70%, reaching 9.49 billion tokens, while the supply of USDS has risen by 23% to almost 4.81 billion, based on data from DeFiLlama. These spikes have vaulted USDe into the third-largest stablecoin by market capitalization and pushed USDS into fourth place. Both tokens have capitalized on the yield vacuum to attract fresh liquidity at an unprecedented pace.
Governance Token Rally Amplifies Interest
Ethena’s governance token, ENA, has mirrored the surge in USDe supply, rallying nearly 60% since mid-July as traders anticipate higher staking rewards and protocol fees. ENA’s price rose to $0.58, showing increased confidence in Ethena’s model. Analysts view the governance rally as a bellwether for yield-bearing stablecoins, suggesting that token ecosystems with robust governance frameworks may capture a growing share of investor attention.
Broader Market Outlook and Potential Headwinds
The broader stablecoin market has expanded from $205 billion at the start of 2025 to $268 billion today, a 23.5% increase, as traditional issuers and newcomers alike respond to fresh regulatory clarity. Experts predict the overall stablecoin supply could approach $300 billion by year’s end if current trends persist. Still, some market observers warn that tokenization efforts by traditional finance could temper growth by offering regulated alternatives with comparable speed and security.
