stablecoin

Decentralized finance (DeFi) has begun to offer an increasing number of services typically associated with traditional finance. With Venus Protocol, users can permissionlessly lend or borrow from a pool of assets, and suppliers of collateral can benefit from their passive funds.
However, instead of a centralized player handling transactions, the protocol automates the process using technologies such as smart contracts.
What is Venus Protocol and how does it work?
Venus Protocol is an algorithmic money market and synthetic stablecoin protocol. Traditionally, the money market is an essential part of the economy that deals with short-term loan needs.
Now, however, Venus is bringing decentralized finance (DeFi) lending and borrowing onto the BNB chain. It also allows collateral suppliers to mint the platform's native synthetic stablecoins (VAI) by over-collateralizing positions.
Venus Protocol is a fork of Compound and MakerDAO. Both are Ethereum-based, with the first being a money market protocol and the second, a stablecoin minting protocol. Venus integrates these functions into one, allowing users to utilize the same collateral within one ecosystem, regardless of which function they use.
You can think of the Venus Protocol as a permissionless lending environment. Firstly, it allows BNB Chain users with idle cryptocurrency to supply collateral to the network. Secondly, users who need more can borrow by pledging over-collateralized cryptocurrency. Lenders then receive compounded annual interest rates, while borrowers pay interest on their respective loans.
The interest rates for lending and borrowing are set by the protocol in a curve yield that varies based on utilization. These rates are automated according to the demands of the specific market, such as BNB or ETH. However, the protocol’s governance process also sets minimum and maximum interest rate levels.
Synthetic stablecoin minting takes place using vTokens, from the collateral users provide to the Venus Protocol. vTokens represent deposited collateral — for example, users receive vUSDT for supplying USDT, which they can later redeem for the underlying collateral. Users can also borrow up to 50% of the collateral value they have on the protocol from their vTokens to mint VAI.
Venus Protocol determines stablecoin interest rates differently from how it does lending and borrowing interest rates. The interest rates for minting are fixed and only the protocol’s governance process is allowed to lower and raise these rates.
The history of Venus Protocol
Venus Protocol was founded by a project development team from global cryptocurrency credit card issuer Swipe, with Venus (XVS) launching in 2020. From the beginning, it aimed to bridge the gap between traditional finance and DeFi on the BNB Chain and provide users with an alternative application free from the issues they’d experienced on Ethereum.
Though Swipe supported the development of the Venus Protocol, there were no XVS token pre-mines for developers, or founders. As such, XVS holders have complete control over the protocol and token.
Venus Protocol redefines its rules according to community preferences. For example, the Venus V2 upgrade included higher VAI liquidation penalties. It also introduced fees for VAI minting and platform withdrawals, both of which were added to the Venus Reserves Treasury. Additionally, the upgrade included an airdrop of the native Venus Reward Token (VRT) to current XVS holders as a reward.
What is possible on Venus Protocol?
Venus Protocol enables users to permissionlessly lend and borrow from a pool of assets. Users can also mint stablecoins (VAI) with over-collateralized positions and participate in the protocol's governance.
Lending
Users can lend and earn changing yield on the assets they supply. Venus Protocol creates pools of these loaned cryptocurrencies using a smart contract and periodically distributes vTokens to them. This way, the protocol unlocks unused value that is already on the BNB Chain but doesn't have a lending market like Bitcoin and Litecoin do.
Borrowing
Venus Protocol utilizes an over-collateralized loan system that requires borrowers to pledge collateral before borrowing. For example, if Ethereum has a collateral value of 50%, users can borrow up to 50% of the value of their own ETH. They can then have a say in the collateral ratio through the protocol’s governance process.
However, according to Venus Protocol’s white paper, the collateral value is typically around 40% to 75%. Users must exercise caution because if the collateral value falls too low, their position will be liquidated. 
Minting stablecoins
The minting and redemption of the synthetic stablecoin VAI is fixed at 1 USD, though its price can still fluctuate according to the supply and demand. 
Venus Protocol users can mint the stablecoin using remaining collateral from previous vToken deposits. Furthermore, anyone can mint stablecoins without central authorities and use newly minted stablecoins for purposes such as earning yield on other DeFi projects.
Governance
Users can also influence the future of the Venus Protocol. The protocol is completely controlled by the community through its governance token XVS, which is a BEP-20 token that can be used for voting.
Users can vote on a number of protocol-related issues, including improvements, adding new tokens to the protocol, adjusting interest rates, and reserving distribution schedule delegations. Venus Protocol also plans to build a product called Venus Vault that will enable users to lock governance tokens to improve the protocol’s anti-risk ability and distribute staking rewards.
What makes Venus Protocol unique?
Venus Protocol helps to bring common financial lending services to blockchain-based decentralized protocols, though it is not the first to do so — there are Ethereum-based DeFi applications with assets worth billions of dollars locked into them.
However, these applications have their pain points, such as high costs, low network speed, and a lack of cryptocurrencies from other blockchains (e.g., XRP and Litecoin). Venus Protocol differs from many other money market protocols in that it enables the use of supplied collateral for not only borrowing, but also for minting stablecoins.
In addition, users can earn yield from minted tokens, as opposed to other protocols that lock such tokens up in smart contracts, with no benefits from underlying assets. Venus Protocol eliminates the need to remove one’s own assets from a money market to mint stablecoins.
Unlike many prominent stablecoins, Venus Protocol’s synthetic stablecoins are not backed by traditional financial assets or fiat but by a basket of other cryptocurrencies. Moreover, BNB Chain makes transactions fast and low-cost while providing a network of wrapped tokens and liquidity.
#stablecoin #Ethereum #bnb
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The Guiding and Establishing National Innovation for U.S. Stablecoins Act, also known as the GENIUS Act, is the first federal law in the United States regulating stablecoins. Signed into law on July 18, 2025, the legislation creates a framework to ensure stablecoins are transparent, fully backed, and safely integrated into the U.S. financial system.
Stablecoins are digital assets designed to maintain a stable value by being pegged to reserve assets, typically fiat currencies like the U.S. dollar. They are commonly used for global transfers and on-chain settlement because they combine the programmability of blockchain technology with the stability of traditional currencies. 
The GENIUS Act aims to strengthen this market by establishing clear rules for issuers, introducing oversight, and providing consumers with enhanced protection. The law reflects a global trend, as regions like the European Union adopt stablecoin regulations such as MiCA. 
Key Components of the GENIUS Act
The GENIUS Act establishes a comprehensive framework for stablecoin issuers, introducing rules that focus on transparency, oversight, and consumer protection in the U.S. market.
Reserve requirements
Stablecoins must be backed 1:1 by safe and highly liquid assets such as U.S. dollars or short-term treasury bills (T-bills). These reserves cannot be used for lending or speculation. To ensure accountability, issuers must publish monthly reports on their reserves, and large issuers with more than 50 billion dollars in circulation must also undergo annual independent audits.
No interest payments
Issuers are not allowed to pay interest or yield directly on stablecoin holdings. This rule is intended to keep stablecoins focused on payments and value transfer, rather than acting like bank deposits or investment products.
Compliance obligations
Both banks and non-bank issuers must follow anti-money laundering (AML), sanctions, and Know Your Customer (KYC) rules under the Bank Secrecy Act. Issuers must also have the technical ability to freeze, seize, or burn tokens when required by lawful orders.
Consumer protections
If an issuer becomes insolvent, stablecoin holders are given priority claims on the reserves before other creditors. The law also sets strict rules on how stablecoins can be marketed, preventing issuers from suggesting they are government-backed, federally insured, or legal tender.
Regulatory oversight
Large issuers will be supervised by federal regulators, such as the Office of the Comptroller of the Currency (OCC), while smaller issuers may continue to operate under state-level oversight. Coordination with agencies, including the U.S. Treasury, the Securities and Exchange Commission (SEC), and the Commodity Futures Trading Commission (CFTC), ensures consistent supervision across the financial system.
Impact of the GENIUS Act
The GENIUS Act is expected to shape both the cryptocurrency market and the broader financial system by establishing clear rules for the issuance and use of stablecoins.
Everyday users
The new framework introduces safeguards designed to enhance the reliability of stablecoins in the United States. Tokens covered under the rules must be fully backed by safe assets. Issuers are required to publish monthly reserve reports, and if a company goes bankrupt, holders would have the first claim on those reserves. Together, these measures are designed to improve transparency and build trust.
These protections are especially important given the risks associated with non-collateralized stablecoins. A notable example was the Terra Luna Crash in 2022. Terra was an algorithmic stablecoin, and its collapse showed how quickly things can unravel when a stablecoin is not backed by reliable assets. The token lost its peg to the dollar and erased more than $40 billion in value within just a few days.
Institutions and platforms
The GENIUS Act introduces regulatory clarity that could expand institutional use of stablecoins. For established issuers such as Circle, which operates USDC, the legislation provides a framework that builds trust and supports wider adoption by businesses and financial institutions.
Clearer rules may also encourage traditional banks to issue their own stablecoins, providing users with more options while increasing competition. Fintech companies and payment providers such as Stripe and PayPal may benefit as stablecoins gain wider acceptance. Regulation makes it easier for these platforms to support stablecoin payments and provide customers with more ways to transact.
Settlement layers
Blockchains, such as Ethereum and Solana, as well as other Layer 2 networks, may experience increased demand as stablecoin usage expands. Each on-chain transaction contributes to higher network activity, driving greater demand for blockspace. Over time, this would strengthen the role of these networks as critical infrastructure for processing and settling stablecoin transactions.
U.S. dollar
The legislation may influence the role of the U.S. dollar in global markets. By requiring stablecoins to be backed with U.S. dollars and T-Bills, the law could increase demand for government debt while reinforcing the U.S. dollar’s position as a widely used reserve currency in both traditional and digital finance.
What Are the Limitations of the GENIUS Act?
While the GENIUS Act establishes a strong framework for regulating stablecoins, several gaps remain:
Yield loophole: The legislation prohibits issuers from paying interest directly to stablecoin holders, but does not apply the same restriction to exchanges or affiliated businesses. This means that yields could still be offered indirectly, which might weaken the rule and raise concerns about stability during times of stress.Offshore issuers: Foreign stablecoin issuers like Tether, which issues USDT, are not fully covered by the law. These stablecoins can still circulate in the U.S. with fewer restrictions, provided they can freeze or block transfers when required by authorities. As a result, a large portion of the stablecoin market remains outside direct U.S. oversight.Uneven regulation: Stablecoin issuers based in the U.S. must follow strict reserve, reporting, and consumer protection rules, while offshore issuers do not face the same standards. This uneven playing field could encourage U.S. issuers to relocate abroad, leaving consumers with a variety of stablecoins that offer different levels of protection.
#GENIUSAct #stablecoin #USDT
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