$GENIUS Act Leaves Bank Stablecoins Idle, but DeFi Can Unlock Yield

According to Katana CEO Matt Fisher, bank stablecoins can generate yield through independent DeFi protocols, but holders assume risks not covered by issuing banks.

The $GENIUS Act restricts permitted issuers from paying interest or yield to holders. However, Fisher explained that once a compliant stablecoin leaves the issuer and enters an independent protocol, yield can come from genuine economic activity, such as overcollateralized loans or market makers financing inventory.

Fisher's comments follow a commitment by 21 financial institutions to establish a new stablecoin company during the second half of 2026. The unnamed venture plans to introduce a dollar-denominated token in the first half of 2027 and may later add tokens tied to other G7 currencies, with a euro product listed as its first expansion priority.

While Fisher acknowledged that moving a bank-issued stablecoin into DeFi introduces new exposures, such as smart contract risks and liquidity issues, he emphasized that these risks are not mitigated by the issuer's guarantee. Eligible payment stablecoins are not FDIC-insured deposits under the U.S. framework.