Big news! The U.S. Senate is advancing the "GENIUS Act," and the crypto world is in an uproar! This act imposes strict regulations on stablecoins, and the crypto space is likely about to undergo a major upheaval!

First, let's talk about stablecoins. Moving forward, stablecoins must be 100% backed by U.S. dollars or U.S. Treasury bonds, and they must publicly disclose their reserves every month. This is a significant benefit for large projects, like USDC, which is compliant and will certainly take off. However, small projects will suffer; they may not be able to bear the compliance costs and are likely to be eliminated. Even more drastically, the act directly bans algorithmic stablecoins (like DAI); they will either have to transform into fully collateralized models, or they will simply fade away. In the future, the stablecoin market may only have a few giants left, leaving little room for mid-sized and small players.

Now, let's take a look at DeFi and public chains. Once stablecoins are compliant, the number of users will definitely increase, and DeFi protocols like Curve and Aave are estimated to see a significant rise in trading volume. Ethereum, being the main network for stablecoin circulation, will experience increased on-chain activity, leading to higher gas fees and trading volume; ETH might even surge again. Even new public chains like Solana and Sui could benefit from the increased circulation of stablecoins. Some institutions say this act is even more critical than a Bitcoin ETF and could directly trigger a long bull market for cryptocurrencies.

However, there are deeper underlying purposes behind this act. The U.S. aims to bind stablecoins to the dollar and U.S. Treasury bonds to solidify the dollar's hegemony. In the future, stablecoin issuers will need to hoard a substantial amount of U.S. Treasury bonds, potentially reaching hundreds of billions annually, which can finance the U.S. government. The more stablecoins are used in global payments, the more stable the dollar's position will be.

Of course, the risks are not insignificant. The compliance costs for small projects may be too high, potentially pushing them out of the market. Moreover, if there are issues in the U.S. Treasury bond market and stablecoin reserves shrink, it could trigger a bank run, similar to the UST collapse back in the day. So while this act regulates the market, it also conceals many hidden dangers.

In summary, this act signals a shift by the U.S. from "suppressing" stablecoins to "incorporating" them. The crypto world is about to undergo a major reshuffle, with opportunities and risks coexisting. Everyone, discuss with your friends who are into crypto; do you think this act is a boon or a bane?

Leave your thoughts in the comments! Share this with your crypto friends, follow me for more key updates!