#StablecoinLaw

Genius Act: The United States will attempt to regulate cryptocurrencies, but that won't free them from risk

The cryptocurrency sector has seen the approval of the GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act) in the U.S. Senate as a significant victory in mid-June of this year. With this law, the United States aims to regulate a type of cryptocurrency known as stablecoin (whose prices are linked to a physical currency). However, a more detailed analysis reveals that it could help trigger a new economic collapse.

With the GENIUS Act in the U.S. Senate, large companies like Amazon and Walmart are already planning to issue their own stablecoins for their customers to use. But the idea of companies having their own currency raises serious questions. Can Amazon tokens be used to pay at Walmart (or vice versa)? Will the value of Walmart tokens be the same if I use them to pay at Amazon? If every major company in the U.S. decides to create its own token, which token should be used for each transaction?

Since the GENIUS Act will regulate stablecoins, people may believe that all of them are equally safe. However, this cannot be guaranteed, and it is also unknown how companies will leverage their stablecoins for their own benefit.

Regulation is not a guarantee

Obviously, this does not have to happen. With the new legislation, companies that issue stablecoins will be regulated, and regulators will ensure that they have enough reserves to fulfill their promises if investors panic.

However, financial regulators are not infallible. Just a few years ago, in 2023, they did not realize that Silicon Valley Bank had too many assets at risk. This oversight ultimately led to the bank's collapse.

Therefore, it is not difficult to imagine a situation where several companies may irresponsibly issue too many stablecoins. If this occurs, the consequences could be disastrous.