Stablecoin Yield Rules Under MiCA and the GENIUS Act

Why the question of stablecoin yield went from niche to urgent

For most of crypto's history, holding a dollar-pegged token meant accepting a 0% return. Tether and Circle, the two issuers that dominate the market, never paid interest on USDT or USDC. That began to change around 2020, when decentralized finance protocols started offering double-digit yields on USDC and DAI deposits, and again in 2023 and 2024 when newer issuers like Ethena and Sky built yield directly into the token itself.

That growth forced regulators in Brussels and Washington to answer an awkward question. If a token promises to track the dollar and pays the holder a return, is it still a stablecoin, or has it become a bank deposit, a money-market fund, or a collective investment scheme? Each of those categories has very different licensing requirements, capital buffers, and disclosure rules. The U.S. Treasury and the European Banking Authority have both signalled they would prefer stablecoins to remain 'narrow,' meaning payments and savings vehicles, not yield products.

The policy fight has now hardened into two specific pieces of legislation. In the European Union, the Markets in Crypto-Assets Regulation, or MiCA, took full effect for stablecoins in June 2024 and explicitly restricts interest on regulated e-money tokens. In the United States, the GENIUS Act, short for Guiding and Establishing National Innovation for U.S. Stablecoins, passed the Senate in 2025 and is moving through the House with a similar ban on issuer-paid interest. Neither law, however, tries to stop yield that is generated by a third party such as Aave, Compound, Sky, or Ethena. That single carve-out is why the industry keeps finding ways to pay you anyway.

What counts as 'yield' under each regime

Before drawing a map, it helps to define the term. In crypto, 'yield' can mean at least three different things, and regulators have been careful to define each one separately. The first is interest paid by the issuer directly to the token holder, the kind a bank pays on a savings account. The second is a reward paid in a separate governance or incentive token, which DAI savers received for years in the form of MKR or SKY distributions. The third is a yield earned by depositing the stablecoin into a third-party protocol, such as supplying USDC to Aave or wrapping DAI into sDAI, where the return comes from borrowers, staking spreads, or a savings mechanism that is not run by the issuer itself.

Under MiCA, an e-money token, or EMT, is defined as a token that aims to maintain a stable value by referencing an official currency, and Article 53 explicitly prohibits interest in connection with EMTs. The European Banking Authority's guidance goes further, clarifying that any direct or indirect economic benefit linked to holding the token, including rewards paid in a third token, counts as interest for this purpose. That wording was, in part, a response to Tether's earlier plan to pay a yield on USDT in Europe, which was shelved once the rule was finalised.

Under the U.S. GENIUS Act, the language is narrower. The bill prohibits 'yield' paid by the permitted stablecoin issuer, where yield is defined as any interest, reward, or other return that the issuer itself provides to holders in connection with the token. Critically, the bill does not say anything about yield paid by a third party, including a decentralized protocol. It also does not, on its face, prohibit a tokenised money-market fund share that pays a dividend, since that product is regulated under the Investment Company Act rather than as a stablecoin. The net result is that the U.S. framework draws a tighter line around the issuer, while the EU framework also reaches for certain types of rewards.

Why issuer yield and protocol yield are treated differently

The regulatory logic for the distinction is worth understanding, because it is the reason the loophole exists. When a bank pays you interest on a deposit, it is doing three things: taking custody of your cash, investing that cash into loans or securities, and promising to make you whole if the borrower defaults. The first activity requires a banking or e-money licence. The second is investment activity. The third is a form of insurance that demands capital. Regulators want stablecoins to compete with payment networks, not with insured deposits, because the underlying reserves are not held in a deposit insurance scheme and the issuers do not carry the same capital burden as banks.

Protocol yield sidesteps each of those elements. When you supply USDC to Aave, Aave does not take custody of your dollars in the legal sense a bank would. You retain ownership of the token in your own wallet, and the protocol routes your deposit into a lending pool where borrowers post collateral. The yield is set by the market for borrowing, not by the issuer, and the risk of borrower default is absorbed by the pool, not guaranteed by Circle. From a legal perspective, Aave is closer to an exchange than to a bank, and the GENIUS Act in particular was drafted to keep the issuer from becoming a depository institution.

That is also why the U.S. bill does not treat USDC supplied to Aave as a regulated deposit. The same logic holds in Europe, although MiCA adds extra friction: if a protocol offers a return to EU residents, the protocol itself may need to register as a crypto-asset service provider, and the marketing of that yield has to comply with consumer-protection rules. In practice, this means DeFi front-ends with EU users now carry KYC, and several large protocols geo-block French, German, and Italian users from yield-bearing products even though nothing in MiCA specifically bans the underlying yield.

How Ethena's sUSDe is structured around the rule

Ethena Labs, the issuer of USDe and its staked form sUSDe, has become the most studied case of regulatory arbitrage in the stablecoin space. USDe is a synthetic dollar, meaning it is not backed by cash in a bank account, but by a delta-neutral position of spot crypto plus a short perpetual futures position. The yield on sUSDe is funded by the perpetual funding rate, the periodic payment that longs pay to shorts in crypto derivatives markets, plus the staking yield on the spot leg. In bull markets, that funding rate has been in the teens, and sUSDe paid out an annualised yield north of 30% at one point in 2024.

From a legal standpoint, Ethena is careful to point out that it does not pay interest on USDe. The yield on sUSDe comes from the staking and basis strategy executed by the protocol, and sUSDe itself is a separate token that represents a share of a staking pool, not a deposit. Ethena is incorporated in Switzerland and operates through Ethena Labs GmbH, and the legal opinion it has published argues that sUSDe is not an EMT under MiCA, and that the yield it pays is not interest but a function of the underlying strategy. The GENIUS Act in the U.S. would treat the same product as a permitted stablecoin, since Ethena does not pay interest itself, and the yield is generated by the protocol's hedging activity, not by the issuer's balance sheet.

The trick is real, but it has limits. If a U.S. or EU regulator decided that sUSDe is functionally a yield-bearing stablecoin regardless of its structure, the analysis changes. The U.S. Securities and Exchange Commission has not yet weighed in, and Ethena has not registered sUSDe under the Investment Company Act. For now, the product sits in the gap between 'issuer yield' and 'protocol yield,' and the company has spent tens of millions of dollars on legal opinions to keep it there.

How Sky's savings rate and the DAI to SKY transition fit in

Sky, the renamed MakerDAO ecosystem, has been paying a 'Dai Savings Rate' on DAI deposits since 2019. The rate has ranged from 0.01% to as high as 8% during bull markets, and is set by governance, not by the issuer. The rate is funded by a combination of real-world asset collateral, crypto-backed loans, and the project's own balance sheet, and it has always been marketed as a feature of the Maker protocol rather than a feature of DAI itself.

That framing matters for regulation. The legal entity that issues DAI is RWA Holdings, a Cayman foundation that holds the reserve assets and the patents around the protocol. RWA Holdings does not pay interest on DAI directly. The Dai Savings Rate is set by Sky Governance, the decentralised governance body, and paid from the protocol's surplus. In MiCA terms, the rate is closer to a staking reward or a DeFi protocol yield than to bank interest, which is why Maker's legal team has been comfortable maintaining the product in Europe. The same logic survives a U.S. GENIUS Act analysis, because the yield is paid by the protocol, not by the issuer.

Sky has now launched a successor token, USDS, alongside a new reward token, SKY, which replaced MKR. Holders of DAI can wrap into USDS and earn the Sky Savings Rate, denominated in SKY rather than DAI. That is a meaningful legal shift. Under the GENIUS Act, paying yield in a non-stablecoin token still counts as yield paid by the issuer, so Sky is careful to keep the rewards flowing through a sister protocol, Sky Core, and to characterise SKY distributions as governance incentives rather than interest. It is the same architectural dodge Ethena uses, repackaged for a different regime.

What enforcement has actually looked like so far

Both MiCA and the GENIUS Act are young, and the real test of either framework will be enforcement. The European Banking Authority has so far focused on issuers that marketed yield in the EU before the rules kicked in, including Tether, which dropped its European yield plans in late 2024. Circle has been more cautious, refusing to pay interest on USDC and routing users to regulated venues such as Circle Yield, which is a tokenised money-market fund product available only to institutional clients in approved jurisdictions.

In the U.S., the SEC has continued to investigate yield-bearing products as potential securities, particularly those that promise returns in exchange for pooled capital. The agency has not, however, taken action against a major issuer for paying yield per se, and the GENIUS Act was written precisely to take that question off the table for compliant issuers. The Department of Justice and FinCEN have focused on issuers that failed to register under state money-transmitter laws, not on the question of yield, so far. That is unlikely to last: as protocol yields grow into the tens of billions of dollars, expect the Treasury, the SEC, and the European Banking Authority to revisit whether protocol-level yield should be recharacterised as issuer yield when the same entity sits on both sides.

What this means for the reader holding USDC, DAI, or USDe

The practical takeaway is that the regulatory line is drawn around the issuer, not the token. As of mid-2025, a European user can hold USDC without earning interest, and a U.S. user holding USDC under a future GENIUS framework will not earn interest from Circle either. Both users can, however, supply USDC to Aave, Compound, Morpho, or a similar protocol and earn protocol yield, subject to the protocol's own terms and the user's local rules. The same is true for DAI: holding it pays nothing, wrapping it into sDAI or depositing it into the Sky Savings Rate pays yield, because the yield is paid by the protocol rather than by the issuer.

This matters for risk. Protocol yield is not backed by the issuer, so if Aave suffers a smart-contract bug or a liquidation failure, the loss is on the depositor, not on Circle. If Ethena's basis trade unwinds sharply, sUSDe can depeg, and the protocol's insurance fund is the only thing standing between the holder and a loss. If Sky's real-world assets underperform, the savings rate can be cut to zero. None of these risks are covered by MiCA, the GENIUS Act, or any deposit insurance scheme. The user is in the position of an unsecured lender to a protocol, even if the marketing says otherwise.

For a reader deciding whether to use these products, the single most useful question to ask is: who is paying the yield, and what license do they hold? If the answer is the issuer under a banking or e-money licence, it is interest, and the relevant rule applies. If the answer is a protocol with no licence, the user is taking on protocol, market, and smart-contract risk in exchange for an unregulated return. The next most useful question is what the yield is funded by, because the cheapest-looking APY in the market is usually funded by the riskiest source.

How to follow stablecoin yield rules the smart way

Stablecoin yield rules move faster than the rulebooks themselves. Headlines about Tether's shelved EU yield product, the GENIUS Act's House progress, and the European Banking Authority's clarification memos all change the picture month by month, and protocol responses such as Ethena's legal opinion, Circle's institutional yield product, and Sky's governance migration all happen at the same time. Tracking that by hand is a losing game. Zippfeed surfaces stablecoin yield headlines with sentiment scoring, bullish, neutral, or bearish, and an importance rating, so you can spot which regulatory moves actually change the products you use and which are political theatre.