The next phase of onchain finance needs regulatory infrastructure, not just issuers | Opinion
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The rapid maturation of onchain finance is bringing the industry to a crossroads. With the passage of the GENIUS Act and the ongoing momentum behind the CLARITY Act, the regulatory conversation is no longer about whether these systems should be regulated — but how. In this environment, the core challenge isn’t how to launch another stablecoin. It’s how to design infrastructure that can thrive within the rules.
- The GENIUS Act sets narrow rules for fiat-redeemable payment stablecoins: licensed, 1:1 backed, redeemable — effectively digital cash, but limited in scope.
- Innovation is shifting outside this perimeter, with protocols that avoid fiat redemption, default yield, or payment claims — focusing instead on capital transformation infrastructure.
- The CLARITY Act reinforces this by distinguishing decentralized, non-custodial protocols from intermediaries, framing them as infrastructure rather than financial services.
- The future of onchain finance lies not in new stablecoins, but in protocol architecture: systems that embed compliance, collateralization, and programmability as rails for capital at scale.
The GENIUS Act
The GENIUS Act makes this distinction explicit. It establishes a licensing regime for fiat-redeemable payment stablecoins and bans the payment of interest to holders. This regime is clear — and intentionally narrow. It applies to digital assets intended for retail payments, backed 1:1, with guaranteed redemption. It’s a framework for digital cash. But capital doesn’t move as cash alone.
Much of the innovation in onchain finance is now happening outside this perimeter — not in violation of the law, but by building where GENIUS doesn’t apply. Protocols are emerging that don’t offer fiat redemption, don’t pay yield by default, and don’t claim to be payment tools. Instead, they are designing systems where capital — whether crypto-native, tokenized, or fiat-linked — can be programmatically transformed into usable liquidity, under rule-based conditions. In other words, they are building infrastructure.
The CLARITY Act
CLARITY points in the same direction. By proposing a legal distinction between digital asset intermediaries and decentralized protocols, it implicitly recognizes that not all systems should be regulated as custodians or brokers. Protocols that are credibly neutral, non-custodial, and not controlled by any single party may qualify as infrastructure, not financial services. The path to regulatory alignment may not run through product design, but through protocol architecture.
Many recent protocol designs already reflect this shift. Yield is separated from base liquidity through opt-in mechanisms. Redemption is optional or unavailable. Collateral is enforceable, custody-ready, and often structured through legal wrappers. Access is segmented — with institutional channels operating under permissioned conditions while maintaining composability with open finance. These systems are built not just to function, but to integrate: they anticipate how capital needs to behave under regulatory and institutional scrutiny.
That’s where the market is headed. New capital-layer systems are emerging with a different design philosophy. They embed mint/redeem logic that mirrors traditional collateralization. They provide rule-based interfaces that support capital transformation — from deposit to liquidity, from collateral to yield — without crossing into prohibited or regulated activities. They are infrastructure, designed to operate compliantly by default.
They don’t promise redemption. They don’t offer interest. They don’t operate as wallets or payment platforms. What they provide is programmable logic for capital transformation: a set of rails where assets can be onboarded, structured, and deployed into DeFi and institutional strategies alike. These systems aren’t stablecoins. They are infrastructure.
This evolution reflects a deeper shift. As the onchain economy matures, the distinction that will matter most isn’t between regulated and unregulated — it’s between product and protocol. Issuers offer access. Infrastructure defines form. And it’s in the infrastructure that the long-term utility of tokenized capital will be realized.
Not in another dollar. But in the systems that make dollars — and everything else — usable, compliant, and composable by design.
This is the next phase of onchain finance. It won’t be won by better branding or tighter pegs. It will be won by architecture.
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