The United States Senate passed on Tuesday the GENIUS Act. This is the first federal legislation to establish guardrails regarding US dollar pegged stablecoins.
This bill was passed by a vote of 68-30, which marks a crucial step towards establishing a framework that regulates the issue and supervision of digital dollars for private companies.
The bill still needs approval from the Republican-controlled House, but its Senate passage marks a pivotal moment — not only for stablecoin technology, but also for the growing political influence backing it.
What is the GENIUS Stablecoin Bill?
The GENIUS Act, formally called the Guiding and Establishing National Innovation for US Stablecoins Act, introduces federal standards for stablecoins.
The key provisions are the full-reserve requirement, monthly audits and anti-money laundering protocol.
The GENIUS Act, according to Sen. Kirsten Gillianbrand (D-NY), one of its sponsors, will “protect consumers, allow responsible innovation and protect the dominance the US dollar.”
The bill creates a regulatory pathway that allows banks, fintech companies, and large retail chains to participate in the stablecoin movement or to integrate it into their payment systems.
The passage of this bill also gives a seal of federal legitimacy to an important segment of the ecosystem of digital assets, which is likely to encourage further adoption of these assets by traditional financial institutions.
Circle, which is the second largest player in the USDC industry and issues the USDC stablecoin, went public recently, and shares surged nearly 170% at the debut.
John Wu, the president of the crypto company Ava Labs called this bill an important moment in the history of the industry.
Wu stated in a press release that “this is the foundation for legitimizing and embedding stablecoins into the global money network.”
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What is the impact of the GENIUS bill on stablecoins issuers and their business?
The GENIUS Act will redraw stablecoin maps, giving US-regulated issuers such as Circle USDC, PayPal USD and future tokens issued by banks a competitive advantage over offshore issues like Tether.
Himanshu Maradiya is the founder of CIFDAQ, a crypto exchange. He said that Tether being excluded from US financial rails may lead to a reshuffle on stablecoin dominance.
Expect US stablecoins will gain more market share, and institutional adoption is expected to increase. Investors are encouraged to keep an eye out for stablecoins and DeFi infrastructure that is GENIUS compliant, as the regulatory environment becomes more clear.
Foreign stablecoins can operate in the US if their regulatory systems are equivalent to those of US institutions and they have sufficient reserves.
Tether may have difficulty meeting the new US standards for compliance outlined by the GENIUS Act.
This legislation allows foreign banks to issue US currency, however, it comes with strict requirements, such as the equivalent of foreign regulations, the oversight of the Office of the Comptroller of the Currency and the maintenance of adequate reserves at US banks.
If Tether does not adapt, it will lose access to the US Market as more domestic competitors gain market share under federal supervision.
Source : the Block
Big Tech is preparing to take on traditional finance and retail, but there are limits.
This bill also opens up mainstream adoption.
Shopify has already enabled USDC payments in partnership with Coinbase and Stripe. Bank of America also expressed interest in the stablecoin issue.
The stakes are very high. According to Deutsche Bank, stablecoin transactions will surpass Visa and Mastercard in 2023.
The GENIUS Act prohibits non-financial technology companies to directly issue stablecoins unless these tech firms collaborate with regulated institutions.
Although this prevents another “Facebook Diem”, critics say that the enforcement and supervision mechanisms are still vague.
The Office of the Comptroller of the Currency will supervise companies, and we expect to see more clarity when the bill reaches the House of Representatives.
Bill gets bipartisan support, but there are still some critics
Before the 2024 elections, a group of Silicon Valley crypto executives and political analysts launched a massive push in Washington. They formed a number of super-PACs, which spent more than $130 million on tight races for Congress across the nation.
These super-PACs, which include both Democrats and Republicans, have been able to win 53 of the 58 elections they contested.
The GENIUS Act was passed by 18 Senate Democrats and Republicans, while only 2 Republican Senators opposed it.
A coalition of Democrats led by New York Senator Kirsten Gillianbrand supported the bill despite the opposition expressed by some party leaders.
Elizabeth Warren, a Massachusetts senator, was one of the most vocal critics. She warned that “the bill’s thin regulation” is similar to lax oversight which contributed to 2008 financial crisis.
She said, “It is the same thing a second. Why is this industry asking for regulations? “They want to be rewarded with the US Government’s oversight, but without any real oversight.”
Senate Majority Leader Chuck Schumer also opposed the bill, acknowledging that it had improved during negotiations but arguing it still lacked key anti-corruption safeguards–especially those aimed at preventing Donald Trump and his family from continuing to profit from the cryptocurrency sector.
The Democratic legislators had originally hoped that they could address these concerns through amendements.
John Thune, Senate Majority whip and former Senate Minority leader of the Senate, assured Democrats that their suggested changes will be taken into consideration. This led to more than 100 suggestions for modifications.
Many of these concerns were not resolved by the time that the Senate debated the bill.
The post What Is the GENIUS Stablecoin Bill and How it Could Rewrite Crypto Regulation may be updated as new information unfolds
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