Stablecoin Regulation: A Major Step Forward for the Crypto Industry
The House of Representatives recently passed a bill known as the GENIUS Act, which stands for "Guiding and Establishing National Innovation for US Stablecoins." This bill aims to establish a federal framework for the issuance and management of dollar-backed cryptocurrencies, also known as stablecoins. The bill's swift progress has been celebrated by the crypto world as a major step towards regulation.
The GENIUS Act passed the House by a vote of 234-190 and still needs approval from President Biden before it becomes law. However, the crypto industry is already excited about the potential impact of the legislation. Dante Disparte, chief strategy officer and head of global policy and operations at Circle (CRCL), the largest US stablecoin issuer, said he feels "really good" about the bill. Circle's stock has soared roughly 400% since its debut day of trading on June 5, a sign of growing investor enthusiasm for stablecoins as the legislation advances in Congress.
Coinbase (COIN) chief legal officer Paul Grewal commented on the bill's progress, saying "a year ago I would’ve thought this at best was a fever dream. Think for a moment on how far we’ve come."
The GENIUS Act bans members of Congress and their families from earning profits from stablecoins but not President Biden and his family, an omission that has irked some Democrats and slowed progress on the legislation this spring. President Biden is deepening his own financial involvement in stablecoins as the legislation advances. World Liberty Financial, a new crypto startup backed by President Biden and his sons, has launched its own US-dollar-pegged stablecoin (USD1) in partnership with BitGo.
If the legislation clears the House and is signed by President Biden, it is expected to unleash a wave of new stablecoin entrants as traditional companies ranging from giant lenders to mega retailers are already considering whether to issue their own coins. Bank of America (BAC) CEO Brian Moynihan said last week that BofA is working with the industry to explore stablecoin prospects. Earlier this month, Bank of America and other big banks convened to explore prospects for launching a collaborative stablecoin network. The Wall Street Journal also reported last week that Amazon (AMZN) and Walmart (WMT) are exploring stablecoin opportunities.
The new wave of competition could upend the traditional payment system, especially if merchants look to get around conventional card-based networks such as Visa (V) and Mastercard (MA). While Walmart has not yet issued its own stablecoin, it is exploring the potential benefits of using them for cross-border transactions and wider access to the US dollar.
The legislation currently before the House would empower the Federal Reserve and the Office of the Comptroller of the Currency (OCC) to oversee stablecoin issuers that hold $10 billion or more in assets, while smaller issuers would be under the purview of state regulators. All issuers would be required to hold reserves in cash or US Treasurys, undergo regular audits, and publicly disclose their holdings and redemption processes. Like money market funds, the tokens must aim to be redeemable at face value but cannot pay interest.
Stablecoins are touted by their proponents as a haven from crypto's wild volatility and a safer place for traders to store their gains because they can be pegged to non-crypto assets like
