'A few explanatory notes regarding the 'historic moment' GENIUS bill that has attracted industry-wide attention'
* What is this thing for:
To create an overall framework and clear 'federal regulatory framework' for stablecoin issuers operating in the U.S. and their products, or for the circulation or trading of their stablecoins within the U.S.
'Payment Stablecoin' One
- This bill defines 'payment stablecoins' and explicitly excludes such stablecoins from being classified as securities or commodities (now issuers can rest assured, remember the past experiences of stablecoin issuers being classified as 'issuing securities' and stablecoins being treated as 'providing securities trading' on exchanges...).
Who can issue? One
Key point: Future compliant stablecoin issuance is a licensing system.
- Only entities that are registered in the U.S. and have obtained licenses can legally issue payment stablecoins.
- These entities can be subsidiaries of insured deposit institutions (IDI), federally qualified non-bank payment stablecoin issuers approved and regulated by the OCC, or state-qualified issuers established under state law and approved by state payment stablecoin regulatory agencies.
Who can issue? Two
- Requires similar bank-like regulation of issuers, regardless of whether they themselves are banks.
- Therefore, if it is not an approved deposit institution, everything else needs to be 'approved'.
- Of course, the bill also gives U.S. digital asset service providers (such as exchanges and trading companies) a 3-year grace period; after this grace period, it is prohibited to provide or sell stablecoins issued by unlicensed issuers.
Bottom line: No empty positions!
Key point: Reserve asset mandatory requirement 1:1
- Additionally, there are requirements for reserve assets: qualified reserve assets include U.S. dollars, insured deposits, short-term U.S. Treasury bills, qualified repurchase agreements, and possible central bank reserves. Among these, the inclusion of repurchase agreements as reserve assets has been questioned.
Mandatory reserve asset requirement 1:1, Two
- Prohibition on re-pledging reserves.
- Reserves must be segregated from operational funds (you cannot casually invest reserve funds or seek out messy high-yield opportunities! Many stablecoins on the market, are you listening?).
Prohibition of interest-bearing stablecoins:
Key point: Prohibit licensed issuers from providing returns or interest on the stablecoins they issue.
- Be clear: Issuers are prohibited from providing returns! Third-party platforms can provide them.
- Can related companies of the issuer provide returns (unclear)?
- This clause mainly prevents stablecoins from directly competing with bank deposits for returns, aligning with the idea that stablecoins are primarily used for payments rather than investments.
What happens if the issuer goes bankrupt?
- In the event of issuer bankruptcy, stablecoin holders have priority claims on reserve assets.
- There is a mandatory requirement for timely redemption and public disclosure of redemption policies.
Anti-money laundering
- Issuers must implement an AML/CIP/sanctions compliance program.
- Issuers must demonstrate the technical capability to comply with U.S. legal orders to freeze, destroy, or block tokens.
- U.S. intelligence and law enforcement actions are not constrained by key limitations. The Treasury may exempt secondary market trading restrictions for national security reasons.
- Although the bill requires an expanded AML program, opponents have continuously challenged the bill on the grounds of insufficient anti-money laundering measures.
'How to handle foreign issuers' One
- The bill aims to bring foreign-issued stablecoins under regulatory oversight.
- Foreign issuers must come from jurisdictions with comparable systems and be registered with the Office of the Comptroller of the Currency (OCC).
'How to handle foreign issuers' Two
- Must comply with U.S. legal orders and hold sufficient reserves in U.S. financial institutions to meet liquidity demands of U.S. customers.
- This aspect is also the most controversial. Opponents argue that these regulations are not strict in substance, will put U.S. issuers at a disadvantage, and encourage offshore registrations.
- This is mainly aimed at Tether. I wonder what U.S. deputy-level official Lutnick thinks?
'Payment Stablecoin' Two
- Payment stablecoins are defined as digital assets used for payments or settlements, pegged to the value of fiat currency, and fully backed 1:1 by U.S. dollars, short-term Treasury bills, or similar high-quality liquid assets. (USDT likely does not meet this definition because a significant portion of its backing is BTC; algorithmic stablecoins? Don't join the fray.)