- The GENIUS Act prohibits issuers from paying yield tied solely to holding, using, or retaining payment stablecoins, but third-party incentives remain an opportunity.
- Coinbase and Kraken retain licensing and brokerage advantages under the existing state-based system.
- SEC relief allows qualifying tokenized-stock venues to test automated market makers and liquidity pools for five years, while token buybacks received conditional guidance.
GENIUS Act Leaves Opening for Third-Party Stablecoin Rewards
The GENIUS Act, enacted on July 18, 2025, establishes a separate interest prohibition for issuers that create and redeem payment stablecoins. The law targets issuer-paid yield tied solely to holding, using, or retaining the stablecoins. According to Hougan’s analysis, the restriction may still leave room for incentives paid by third parties.
Crypto exchange Coinbase (Nasdaq: COIN) uses third-party incentives to attract customers and has defended stablecoin rewards against bank-style regulation. Hougan’s analysis identifies Coinbase as the largest beneficiary of the opening. It also argues that resistance from banks could help stablecoins gain share from the traditional financial system.
Coinbase and Kraken Retain Exchange Licensing Advantages
Established trading operators retained licensing and brokerage advantages that the proposed legislation threatened, according to the analysis. Hougan wrote that a national licensing framework would have simplified market entry for traditional financial companies. Coinbase and fellow exchange Kraken instead retain the advantage of obtaining permissions through the existing state licensing system.
The proposed legislation also would have limited exchanges’ ability to combine trading venues with brokerage services, Hougan wrote. Trading venues match orders, while brokers handle customer orders. Preserving the combined model avoids the higher costs that Hougan associated with separating or restricting those functions.
SEC Tokenized Stock Exemption Creates Testing Opportunity
Financial businesses that represent assets as blockchain tokens gained an opportunity to test stock trading through regulatory action, the analysis argues. The Securities and Exchange Commission (SEC) issued a five-year exemption for tokenized stock trading on Sept. 17.
Qualifying venues can use permissioned automated market makers and liquidity pools. These systems facilitate trades through software and pooled assets for authorized participants. The temporary relief exempts qualifying venues from the legal definition of an exchange and certain liquidity providers from the definition of a dealer. However, restrictions apply to eligible stocks and trading volume.
Hougan contrasted the immediate testing opportunity with the proposed legislation’s study and rulemaking process, which he expected to take years. He singled out Securitize (NYSE: SECZ) as a beneficiary. Securitize tokenizes funds for institutions including Blackrock, Apollo, and KKR, and serves as the transfer agent maintaining ownership records for Blackrock’s tokenized BUIDL fund.
Token Buyback Guidance Offers Conditional Clarity
The fourth category in Hougan’s analysis involves revenue-generating tokens. These tokens use platform fees to repurchase part of their circulating supply. As of Sept. 30, Hougan reported post-vote gains of 104% for NEAR, 49% for Uniswap, 19% for Pump, 15% for Hyperliquid, and 10% for Lighter.
Updated SEC staff guidance addresses whether announcements of token repurchases promise work on which purchasers rely when expecting profits. For a non-security asset operating on a functional system without a central party, the announcement would not constitute that promise, according to the guidance. SEC staff added the condition requiring the absence of a central party on Sept. 28. The guidance does not have legal force.
The treatment of token buybacks also depends on the network’s development stage and how potential returns are presented. For an unfinished system, presenting repurchases as a way to create yield could constitute a promise on which purchasers rely for expected profits.
Why This Matters
Hougan identified one remaining risk: An administration taking office in January 2029 could appoint regulators who take a harder line on digital assets. In his assessment, growing blockchain involvement by major financial firms makes a reversal less likely. The analysis therefore points to a regulatory environment in which stablecoin incentives, exchange structures, tokenized securities, and token buybacks may continue developing, but with conditions that vary by product and network maturity.
Frequently Asked Questions
What does the GENIUS Act prohibit for stablecoin issuers?
The GENIUS Act prohibits issuers from paying yield tied solely to holding, using, or retaining payment stablecoins. Hougan’s analysis says third-party incentives may remain outside that prohibition.
Which companies benefit from the exchange and tokenization rules?
Coinbase and Kraken retain licensing and brokerage advantages under the existing state licensing system. Hougan also identified Securitize as a beneficiary of the SEC’s five-year tokenized-stock trading exemption.
Is the SEC’s token buyback guidance legally binding?
No. The updated SEC staff guidance has no legal force. It explains how certain buyback announcements may be evaluated, including whether they promise work that purchasers rely on for expected profits.
