What is the difference between a stablecoin and a money market fund?

The main difference between a stablecoin and a money market fund is what you own and whether you earn anything. A money market fund share is a security that pays dividends from the interest its holdings earn. A payment stablecoin is a digital token for moving dollars, and in the US its issuer is not allowed to pay you interest for holding it.

Are stablecoins like money market funds?

In some ways, yes. According to Investor.gov, money market funds invest in liquid, short-term debt, cash and cash equivalents, and most retail and government funds try to keep a stable $1.00 share price. Under the GENIUS Act, US payment stablecoin issuers must hold reserves at least 1 to 1 in assets such as cash, bank deposits and Treasury bills maturing in 93 days or less. Both are built around low-risk, short-term assets.

The structure is different. A fund is an investment product sold with a prospectus. A stablecoin is a token on a blockchain that can be sent to any compatible wallet at any hour. The GENIUS Act also excludes anything that counts as a security from the definition of a payment stablecoin. For the basics, see what is a stablecoin and what is the GENIUS Act.

Do stablecoins pay interest?

Not directly from US-regulated issuers. The GENIUS Act, signed in July 2025, bars permitted issuers from paying interest or yield in any form just for holding, using or keeping the coin. The issuer keeps the interest its reserves earn.

There is a grey area. A March 2026 Congressional Research Service report notes the law does not clearly stop exchanges or other third parties from offering rewards on stablecoins they hold for customers, and Congress was still debating this as of that report. Some products are designed to pass on yield, but they work differently. See yield-bearing stablecoins and tokenized Treasuries.

A money market fund, by contrast, pays dividends that generally follow short-term interest rates, minus the fund's fees.

How is a stablecoin different from a bank deposit?

A bank deposit at an FDIC-insured bank is protected up to at least $250,000 per depositor if the bank fails. The FDIC says that insurance does not cover crypto assets, stocks, bonds or mutual funds, and does not apply when a non-bank company fails.

The GENIUS Act states that payment stablecoins are not insured deposits and are not backed by the US government. Instead, holders get a priority claim on the issuer's reserves if the issuer becomes insolvent, and issuers must publish their reserve makeup every month.

Money market funds are not FDIC insured either. Investor.gov notes you can lose money in one, and a fund that moves more than half a cent from $1.00 must reprice its shares, which is known as breaking the buck. Stablecoins carry a similar risk of losing their peg if confidence in the reserves slips.