If stablecoins implement a negative interest rate policy, their use in DeFi could shift significantly. Negative rates might discourage holding stablecoins, pushing users toward yield-generating assets or protocols offering positive returns. This could reduce stablecoin liquidity in lending pools, as users seek to avoid losses, potentially increasing borrowing costs. DeFi protocols may need to adjust incentives, such as offering higher staking rewards or subsidies, to maintain stablecoin utility. Conversely, negative rates could spur innovation, with new DeFi strategies emerging to hedge against losses or capitalize on rate arbitrage. However, user confidence in stablecoins as a "safe" asset might erode, driving adoption of alternative assets or non-custodial solutions. The overall impact would depend on the policy's design and market adaptation.