The GENIUS Act introduces new regulations to prevent technology corporations and large financial institutions from dominating the stablecoin market.
The regulations require non-bank organizations issuing USD-pegged tokens to establish an independent entity similar to Circle, overcoming antitrust barriers and subject to veto by the US Finance Committee, aimed at protecting consumers and the stability of the US dollar.
MAIN CONTENT
The GENIUS Act prevents the domination of large corporations in the stablecoin market.
Requires the establishment of an independent entity subject to the oversight of the Finance Committee when issuing stablecoins.
The management structure of stablecoins is designed to be more conservative than that of JPMorgan and large financial institutions.
What is the GENIUS Act and what is the main goal of this regulation?
The GENIUS Act is a new law regulating the issuance of stablecoins with the goal of preventing technology corporations and large financial institutions from dominating the market, protecting consumer rights, and maintaining the stability of the US dollar.
This regulation requires non-bank organizations issuing stablecoins to establish an independent business entity and meet strict antitrust criteria.
What does the GENIUS Act require for stablecoin issuing organizations?
Dante Disparte – Chief Strategy Officer of Circle, stated that stablecoin issuers must create an independent entity, similar to how Circle operates, not a traditional bank, and must obtain approval and veto from the Finance Committee.
This aims to ensure that the stablecoins issued are free from credit risk, do not provide leverage or lending, helping to mitigate systemic risk and increase reliability for investors.
"This structure is even more conservative than the deposit token model proposed by JPMorgan Chase and other financial institutions. It establishes clear rules, providing the greatest benefits to US consumers, market participants, and the US dollar."
Dante Disparte, Chief Strategy Officer of Circle, July 2024
Analyzing the highlights of the GENIUS Act regulations
Stablecoin issuers must hold reserves at independent legal subsidiaries and account for them transparently on their balance sheets. They are restricted from applying leverage, lending, or engaging in risky activities.
This indicates that the regulations emphasize caution, creating a legal framework that minimizes market risks, helping to increase stability and trust from both consumers and large-scale investors.
How does the GENIUS Act compare to the stablecoin model of traditional financial institutions like JPMorgan?
Compared to JPMorgan's deposit token model and traditional financial institutions, the GENIUS Act requires a higher level of conservatism and stricter controls on the issuance of stablecoins, particularly a clear separation of management and legal obligations.
GENIUS Act Criteria JPMorgan Model Issuer Independent, non-bank entity Large financial institutions, traditional banks Control Mechanism Finance Committee's veto Internal control Risk Limits No leverage, no borrowing Lending and leverage may be used
What are the benefits of the GENIUS Act for the stablecoin market and US consumers?
The regulations provide transparency and stability, protecting the market from large technology and financial corporations that could manipulate it. Consumers are also guaranteed rights through strict control mechanisms and legal obligations.
At the same time, the US dollar becomes stronger as stablecoins are issued under high safety standards, contributing to the strengthening of the national currency's position in the global financial system.
Frequently Asked Questions
How does the GENIUS Act affect the stablecoin market?
The GENIUS Act enhances controls, prevents monopolies, and increases stability, benefiting consumers and the US cryptocurrency market.
What are the requirements for token issuing entities under the GENIUS Act?
Must establish an independent entity similar to Circle, non-bank and subject to the veto licensing of the US Finance Committee.
What advantages does the GENIUS Act have over JPMorgan's model?
The act is more conservative, limiting leverage and lending, increasing safety and transparency for stablecoins.
Who does the GENIUS Act help protect in the cryptocurrency market?
Consumers, investors, and market participants from risks and manipulation by large corporations.
How does the GENIUS Act impact the US dollar?
Helps reinforce the position of the US dollar by maintaining stability and ensuring transparent management of stablecoins.
Source: https://tintucbitcoin.com/circle-genius-act-han-che-tap-doan-lon/
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