Tokenized US Treasury funds total roughly $15 billion on-chain in May 2026, up from under $1 billion in early 2024. The headline names are BlackRock’s BUIDL at around $2.9 billion, Franklin Templeton’s BENJI suite at around $2 billion, and Ondo Finance’s combined OUSG and USDY platform at around $3.5 billion. The fastest grower has been Circle’s own USYC, which crossed BUIDL in January 2026 and has held the lead on several weeks since. The fact that Circle launched a tokenized money-market fund at all is the story.
Section 4(a)(11) of the GENIUS Act prohibits stablecoin issuers from paying any form of interest or yield “solely in connection with the holding, use, or retention” of a payment stablecoin. The OCC’s February 2026 notice of proposed rulemaking extends the prohibition to affiliates and third-party distributors through a rebuttable presumption. USDC and PYUSD cannot legally compete with a 4.8% MMF token on yield, because the only mechanism that would close the gap is the one the statute bans. Tokenized MMFs sit inside the 1940 Act and pay yield as fund distributions, which the GENIUS Act does not touch.
The two products are now legally distinct
Before GENIUS, “stablecoin” and “tokenized treasury” were positioned as alternative implementations of the same idea: dollars on-chain with reserve backing. The statute split them. A payment stablecoin is a 1:1 transactional instrument that pays nothing. A tokenized MMF is a yield-bearing security with intraday settlement. Institutional treasurers do not have to choose. They use stablecoins for movement and MMF tokens for parking. The competitive question shifts from which product wins to who issues both.
USYC is Circle’s answer. USDC’s market capitalisation sits at around $77 billion in May 2026, up from roughly $60 billion when GENIUS passed. USDC on-chain volume rose 263% year over year in Q1 2026 to $21.5 trillion. USDC continues to grow as a payments rail. Margins on that growth are bounded because Circle cannot pay yield, and the high-margin product line is now USYC. Much of USYC’s expansion has come from BNB Chain, where Binance introduced the token as off-exchange collateral for institutional derivatives trading. Circle’s own product split tells the story: the company is selling both the stablecoin and the tokenized MMF, and the institutional CFO does not have to leave the Circle stack to pick a yield instrument.
Tether’s quieter response
Tether posted a $3 billion contraction in USDT supply in Q1 2026, the first quarterly decline since 2022. Paolo Ardoino has said publicly that Tether does not have much beef in this fight, on the grounds that USDT does not share yield. On 26 May 2026, Tether launched StableEarn, a yield vault on its Stable chain that sources yield from T-bills and gold rather than from issuer reserves. The structure is designed to sit outside the GENIUS yield prohibition by routing yield through a non-issuer wrapper. Whether the OCC’s rebuttable presumption on affiliate yield catches this structure will be the test through 2026 and into the comment cycle on the NPRM. The Bank Policy Institute has urged the OCC to read the prohibition broadly enough to capture exchange-paid loyalty rewards on USDC, which would compress the affiliate-yield route still further and remove the route Coinbase has been using to pay USDC holders the 3.85% “rewards” rate.
The distribution-cost trap and where the wall settles
Circle paid Coinbase $907.9 million in 2024, roughly 90% of total distribution costs. Coinbase keeps 100% of reserve income on USDC held on its platform and 50% of reserve income generated elsewhere. The economics of paying away most of the reserve yield to a single distribution counterparty work only as long as the issuer is positioning a single product. As USYC and similar issuer-branded MMF tokens scale, the issuer can monetise reserve yield directly through fund-management fees inside the 1940 Act framework, without surrendering it through stablecoin distribution agreements. Circle launched Arc and USYC in the same cycle for that reason. The GENIUS Act built a wall between stablecoins and tokenized MMFs. The issuers operating on both sides of the wall keep their margins. The issuers operating on only the stablecoin side surrender most of the reserve yield to whichever distribution platform holds the float. USYC shows the issuer side has read the statute and is acting on it.