Author: Alex Carchidi
Translated by: Baihua Blockchain
On June 17, the U.S. Senate passed the (Guiding and Establishing the U.S. Stablecoin National Innovation Act) (Genius Act), which is the first comprehensive federal stablecoin regulatory framework, overcoming the largest hurdle.
The bill has now been submitted to the House of Representatives, where the House Financial Services Committee is preparing its own text for negotiation and may vote on it later this summer. If all goes well, the bill could be signed into law before the fall, significantly reshaping the landscape of the cryptocurrency industry.
The bill's strict reserve requirements and national licensing system will determine which blockchains are favored, which projects become important, and which tokens are used, thereby influencing the direction of the next wave of liquidity. Let's explore the three major impacts the bill will have on the industry if it becomes law.
1. Payment-type substitute tokens could disappear overnight
The Senate bill will create a new 'licensed payment stablecoin issuer' license and require each token to be backed 1:1 by cash, U.S. Treasury bills, or overnight repurchase agreements (repos) — issuers with a circulation exceeding $50 billion will need to be audited annually. This sharply contrasts with the current 'Wild West' system, which has almost no substantial safeguards or reserve requirements.
This explicit provision comes as stablecoins are becoming the primary medium of exchange on blockchains. In 2024, stablecoins will account for about 60% of cryptocurrency transfer value, processing 1.5 million transactions daily, with most transaction amounts below $10,000.
For everyday payments, a stablecoin token that consistently maintains a value of $1 is evidently more practical than most traditional payment-type substitute tokens, which may fluctuate by 5% before lunch.
Once U.S.-licensed stablecoins can legally circulate across state lines, merchants still accepting volatile tokens will struggle to justify the additional risks. In the coming years, the utility and investment value of these substitute tokens may decline significantly unless they can successfully transform.
Even if the Senate bill does not pass in its current form, the trend is evident. Long-term incentives will clearly favor dollar-pegged payment channels over payment-type substitute tokens.
2. New compliance rules may effectively determine new winners
The new regulations will not only provide legitimacy for stablecoins; if the bill becomes law, it will ultimately guide these stablecoins to blockchains that can meet auditing and risk management requirements.
Ethereum (ETH 1.15%) currently hosts about $130.3 billion in stablecoins, far exceeding any competitors. Its mature decentralized finance (DeFi) ecosystem means issuers can easily access borrowing pools, collateral lockups, and analytical tools. Additionally, they can piece together a set of regulatory compliance modules and best practices to attempt to meet regulatory requirements.
In contrast, the XRP (XRP 0.22%) ledger (XRPL) is positioning itself as a compliance-first tokenized currency platform, including stablecoins.
In the past month, fully supported stablecoin tokens have launched on the XRP ledger, each with built-in account freezing, blacklisting, and identity screening tools. These features align closely with the Senate bill's requirements for issuers to maintain robust redemption and anti-money laundering controls.
Ethereum's compliance framework could cause issuers to violate this requirement, but it is currently difficult to determine how strict regulators' requirements will be in this regard.
Nonetheless, if the bill becomes law in its current form, large issuers will need real-time verification and plug-and-play 'Know Your Customer' (KYC) mechanisms to maintain rough compliance. Ethereum provides flexibility, but technical implementation is complex, while XRP offers a simplified platform with top-down control.
Currently, both blockchains appear to have advantages over chains that focus on privacy or speed, which may need costly upgrades to meet the same requirements.
3. Reserve rules may bring a flood of institutional funds to blockchain
As each dollar of stablecoin must hold equivalent cash-like asset reserves, the bill quietly ties cryptocurrency liquidity to U.S. short-term debt.
The stablecoin market has surpassed $251 billion. If institutions continue on the current trajectory, it could reach $500 billion by 2026. At this scale, stablecoin issuers will become one of the largest buyers of U.S. short-term Treasury bills, using the proceeds to support redemptions or customer rewards.
This connection has two implications for blockchain. First, the demand for more reserves means more corporate balance sheets will hold Treasury bills while also holding native tokens to pay network fees, thereby driving organic demand for tokens like Ethereum and XRP.
Secondly, interest income from stablecoins could fund incentives for aggressive users. If issuers return part of the Treasury bill yields to holders, using stablecoins instead of credit cards could become a rational choice for some investors, thereby accelerating on-chain payment volume and fee throughput.
Assuming the House retains the reserve clause, investors should also expect increased currency sensitivity. If regulators adjust collateral eligibility or the Federal Reserve changes Treasury supply, stablecoin growth and cryptocurrency liquidity will fluctuate in sync.
This is a notable risk, but it also indicates that digital assets are gradually integrating into mainstream capital markets rather than existing independently.
