A 308-122 bipartisan vote and the signature of US President Donald Trump pushed the much-awaited crypto policy, the GENIUS Act, to life. While Republicans in the US House of Representatives registered 206 votes, the Democrats pressed 102 votes. A dramatic, long discussion and debates passed the act, before it became an official act. The Crypto Week, declared by the US, played a significant role in advancing the GENIUS Act, and two other bills — the CLARITY Act and the Anti-CBDC Surveillance State Act. However, these two acts are currently moving to the Senate for approval.
Who can issue stablecoins under the GENIUS Act?
Licensed entities like federal or state-chartered banks, approved non-bank companies, have the right to issue payment stablecoins.
How does the GENIUS Act impact the digital asset industry?
Before we see the impact of the GENIUS Act, let’s know what the act prominently says. Guiding and Establishing National Innovation for U.S. Stablecoins Act, or GENIUS Act, is the first comprehensive regulatory framework for cryptocurrencies in the US. The act focuses on regulating payment stablecoins through audit, reserve, compliance standards, and disclosure.
Now, how does the act affect the industry? With the launch, the stablecoin legislation provides more legal clarity, trust, and transparency to stablecoins, attracting more crypto investors and institutional adoption of stablecoins. As reports show, several banks and institutions might have been waiting for the GENIUS Act, and evidence is high that several of them have already started adopting stablecoins.
Globally, the stablecoin act builds more trust among the issuers, possibly gaining more issuers to join the crypto-supportive environment of the US.
Positive impact on consumers
As stablecoin issuers have to now comply with the GENIUS Act, consumers could feel safer. The act ensures consumer protection. The act requires issuers to hold reserves equal to 100 % of their stablecoin. The issuing companies also have to disclose reports and audits to the public, giving more clarity over the company’s earnings.
GENIUS Act could welcome more traditional finance
Yes, this is another plus point of the GENIUS Act. It has the potential to bring more traditional fintech companies to issue stablecoins or adopt them. Stringer compliance and oversight feature of the act can likely bring more stablecoin adopters and issuers.
Does GENIUS Act drive DeFi growth?
The act bans interest-bearing stablecoins and imposes penalties for launching unbacked tokens. Previously, yield-bearing stablecoins allowed holders to gain interest through lending and staking. However, the genius side of the GENIUS Act topples down these stablecoins, reportedly driving Decentralized Finance (DeFi) growth. And the core reason? Absence of interest-based stablecoins can make investors move on to Ethereum DeFi, as it can offer passive income, believes crypto analyst Nic Puckrin.
As rules are clear, stablecoin adoption increases
Citigroup, a US multinational investment bank, is planning to launch its own stablecoin, as announced by CEO Jane Fraser. JP Morgan Chase has already launched its JPMD stablecoin last month. Payment platform Mastercard supports stablecoin transactions on its network. It has also partnered with OKX crypto exchange and OKX Card for stablecoin funding.
Is the GENIUS Act a hurdle for tech companies?
Several Democrats and critics have argued that the act would be a hurdle for giant tech companies to issue their stablecoins. As most of the tech companies do not operate as a bank, sticking to strict reserve requirements causes regulatory risk, cost, and complexity.
“By failing to close known loopholes and protect America’s digital dollar infrastructure, Congress has risked making the U.S. financial system a global haven for criminals and adversarial regimes to exploit,” said Scott Greytak, deputy executive director of Transparency International U.S, as reported by Reuters.
Meanwhile, Circle’s (stablecoin issuer) Chief Strategy Officer Dante Disparte has a supportive thought for the act. For him, the act is a milestone in US stablecoin regulation. The GENIUS Act is more approachable for traditional banks, whereas tech companies do not benefit from the act.
A pro-crypto country like the US finds the new stablecoin act a great achievement both nationally and globally. As the act pushes the US to thrive in the digital asset industry, its complex rules are not a pleasant matter for tech companies and even smaller players.
