Stablecoin Market Suffers Largest Monthly Drop in Four Years Amid GENIUS Act Fallout

The stablecoin market experienced its largest monthly drop in four years, contracting by over $10 billion to approximately $310 billion in July. According to DeFiLlama, this decline is attributed to the GENIUS Act, which was enacted in July 2025 and prohibits issuers from paying interest on payment stablecoins.

The outflow of capital has led to a surge in adjusted volume, with June 2026 setting an all-time high at $1.79 trillion, representing a 63% increase month-over-month. However, this growth is largely driven by the shift of investors seeking alternative products that can offer yields similar to U.S. Treasury bill rates.

David Krause, a finance professor at Marquette University, explained that the prohibition on paying interest has merely shifted the demand for yield, resulting in capital being redirected into tokenized Treasury funds, DeFi lending protocols, and offshore stablecoin issuers.