Hello, The passage of the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, signed by President Donald J. Trump on July 18, 2025, is a crucial development for the cryptocurrency market. Here's some detailed and very interesting information.
Background and Historical Context
Until now, stablecoin regulation in the United States has been a patchwork of state regulations and a large gray area. This has created uncertainty for issuers and investors, limiting institutional adoption.
* Regulatory Fragmentation: Before the GENIUS Act, stablecoins lacked a clear federal regulatory framework. This meant that their oversight relied heavily on state laws and interpretations by existing financial regulators, leading to inconsistency and a lack of legal certainty. Some stablecoins operated under state-level money transmitter licenses, while others operated in a less defined space.
* Key Events: The need for clear regulation became more evident with events such as the collapse of Terra-Luna in 2022. Although Luna was an algorithmic stablecoin and not backed by traditional assets, its implosion raised concerns about the stability of the entire stablecoin ecosystem and the need to protect consumers. There was also a period in March 2023 where Circle’s USDC experienced a slight depeg from its $1 peg due to exposure to distressed banks, highlighting the importance of reserve quality.
* Classification Debate: One of the main discussions has been whether stablecoins should be classified as securities or not. The GENIUS Act now explicitly defines them as "not securities," which is a major relief for the industry, as it exempts them from the stricter oversight of the Securities and Exchange Commission (SEC).
Anecdotes and Surprises in the Interim of the News
The path to the approval of the GENIUS Act was not without tensions and peculiarities:
* Unexpected Bipartisanship: Despite political polarization in the US, the GENIUS Act achieved significant bipartisan support in both the House of Representatives and the Senate. This is remarkable for crypto legislation and suggests widespread recognition of the need to regulate this space.
*Conflict of Interest Concerns: During the debate, there was criticism, especially from some Democrats like Senator Elizabeth Warren, who raised concerns about potential conflicts of interest. It was noted that President Trump and his family have significant investments in the cryptocurrency space, including their own stablecoin (World Liberty Financial's USD1). The law prohibits members of Congress and their families from profiting from stablecoins, but this prohibition does not extend to the president and his family, sparking debate. Some critics argued that the law could even expand the market for stablecoins like USD1.
* Resistance to Amendments: Several amendments were attempted, especially by Democrats, to strengthen consumer protections, oversight, and financial safeguards. However, many of these amendments were blocked, leading some critics to argue that the law has "loopholes" and may not adequately protect consumers or prevent illicit activities such as money laundering.
* The "Tether Lasso": One particular concern expressed by anti-corruption activists is what they call the "Tether lasso." They argue that the law fails to adequately regulate stablecoins issued abroad by companies registered outside the U.S., such as Tether (USDT), which can enter the U.S. market through secondary channels. However, both Tether and Circle have expressed support for the law, viewing it as an important step toward regulatory clarity.
Global Reach in Cryptocurrencies and Exchanges
The GENIUS Act, as a U.S. federal law, will have significant repercussions beyond its borders:
* Institutional Trust and Adoption: By establishing a clear regulatory framework in the world's largest economy, the GENIUS Act will increase trust in stablecoins. This is crucial to attracting institutional capital that has so far remained on the sidelines due to regulatory uncertainty. We're likely to see more banks, funds, and traditional payment companies integrating stablecoins into their operations.
* Global Precedent: The US has been slow to adopt a clear regulatory stance on cryptocurrencies, but this law positions it as a leader in stablecoin regulation. Other countries and economic blocs, such as the European Union with its MiCA (Markets in Crypto-Assets) framework, have already made progress on their own regulations. US action could drive greater regulatory consistency globally, making the crypto market more stable and attractive to international investors.
* Impact on USDT and USDC: As you mention, Circle (USDC) and Tether (USDT) are the main players.
* USDC: As a US-based stablecoin with a strong focus on transparency and compliance, USDC is expected to adapt well to the new requirements. In fact, the law could solidify its position in the US market by offering a regulatory seal of approval.
* USDT: Tether, being registered outside the US (in the British Virgin Islands), faces different scrutiny. While the law seeks to address foreign issuers serving US customers, the "Tether noose" cited by critics suggests that full control over its use in the US could be complex. However, Tether has expressed a generally positive stance toward the law. Both issuers will need to review their risk management policies and systems to ensure compliance.
* Entry of New Issuers: Regulatory clarity will encourage major traditional financial institutions to launch their own compliant stablecoins. This will increase competition for Circle and Tether and could lead to further fragmentation of the stablecoin market, but also to greater adoption in the traditional financial space.
* Global Exchanges: Exchanges serving US users will need to ensure that the stablecoins they list comply with the GENIUS Act. This could lead to increased due diligence regarding the provenance and compliance of listed stablecoins. Furthermore, increased confidence in US stablecoins could boost their trading volume on global exchanges, as well as the development of new trading pairs.
* Combating Illicit Finance: The law classifies stablecoin issuers as financial institutions under the Bank Secrecy Act (BSA), meaning they will be subject to strict anti-money laundering (AML) and countering the financing of terrorism (CFT) requirements. This also includes the technical capability to freeze or burn stablecoins when legally required. This strengthens U.S. national security and its ability to combat illicit activities.
* DeFi Standards: While the law focuses on payment stablecoins, it also provides definitions and distinctions about which digital assets are commodities, investment contracts, and stablecoins. This could lay the groundwork for broader regulation of the crypto market structure and decentralized finance (DeFi) in the future, including standards for "sufficient decentralization" and oversight of market intermediaries.
In short, the GENIUS Act is a milestone. While it was met with controversy and criticism during its passage, its primary impact will be to legitimize and clarify the stablecoin market in the US, which will inevitably drive institutional adoption and set a precedent for global cryptocurrency regulation. It's an exciting time to watch this space evolve!
OTHER CONSIDERATIONS.
The GENIUS ACT, in my opinion, seeks to address several concerns and establish a framework for trust. Let's analyze each of the processes you mention as "imminent" in light of this new legislation:
1. Development of New Stablecoins by Exchanges
This is a very likely process, and in fact, the GENIUS Act facilitates it by providing regulatory clarity that was previously lacking.
* How does the GENIUS Act guarantee this?
* Regulatory Clarity: By defining stablecoins as "not securities" and establishing clear 1:1 backing and oversight requirements, the law removes much of the legal uncertainty that deterred large players, including exchanges and other financial institutions, from issuing their own stablecoins. Previously, an exchange seeking to issue a stablecoin faced a significant risk of being deemed an unregistered security or falling under an unclear state jurisdiction.
* Legal Risk Reduction: The law reduces the risk of litigation and sanctions from the SEC or other regulators, as long as issuers comply with the new requirements. This makes the development and issuance of stablecoins a much more attractive and secure proposition for large companies.
* Increased Trust: Federal certification and prudential oversight increase public and institutional confidence in stablecoins issued under this framework. This opens the door for more users and businesses to adopt stablecoins, creating a larger and more attractive market for new issuers.
* Differentiation: Exchanges that develop their own stablecoins in compliance with the GENIUS Act will be able to differentiate themselves from less regulated stablecoins or those of uncertain origin.
* Imminent Impact: We're likely to see an increase in announcements from exchanges, banks, and other fintechs planning to launch their own GENIUS Act-compliant stablecoins. This could create increased competition with current market leaders like USDC and USDT, and potentially lead to further innovation in stablecoin-related services.
2. Whether the Dollar Is Pegged to Purchasing Power or Not; Does the Purchasing Power of the Ordinary Citizen Increase or Decrease When a Dollar Is Equivalent to a Stablecoin?
This point is crucial, and the GENIUS Act directly addresses the stablecoin's peg to the dollar, but it does not directly affect the purchasing power of the dollar itself.
* How does the GENIUS Act guarantee this?
* Parity Guarantee (1 Stablecoin = 1 USD): The law focuses on ensuring that the stablecoin is always worth exactly $1 USD. This is achieved through 1:1 backing with liquid and auditable assets, and redemption mechanisms that allow the stablecoin to be exchanged for dollars at par. For the average citizen, this means that if you own 100 stablecoins, you can trust that those 100 stablecoins will always be worth $100 USD.
* Issuer Risk Protection: By requiring reserve segregation and prioritizing stablecoin holders in the event of an issuer bankruptcy, the law protects ordinary citizens from the risk of the stablecoin issuer going bankrupt and losing access to their funds.
* Impact on Purchasing Power:
*Dollar Inflation/Deflation: The GENIUS Act has no impact on the U.S. Federal Reserve's monetary policy or the economic forces that cause dollar inflation or deflation. If the purchasing power of the dollar decreases (due to inflation), the purchasing power of the dollar-equivalent stablecoin will also decrease.
* Benefit for the Ordinary Citizen: The main benefit for the ordinary citizen is not an increase in the purchasing power of the dollar per se, but rather the certainty and security that their stablecoins will maintain their value in USD. This reduces the risk associated with holding digital assets and could encourage greater adoption for payments, remittances, and savings. For an ordinary citizen who uses stablecoins for daily transactions or to protect their savings from the volatility of other cryptocurrencies, the parity guarantee is a major advantage. It allows them to use the dollar digitally with the confidence that it will not lose its face value.
3. The jurisprudence issued does not guarantee the development of structures that support stablecoins and the dollar, both tangible and intangible. How will governments and legal entities guarantee all this?
Here you address the concern about whether the law is robust enough to secure the underlying infrastructure. The GENIUS Act attempts to address this in several ways:
* How does the GENIUS Act guarantee this?
* Material Structures (Payment and Reserve Infrastructure):
* Existing Payment Networks: The law integrates stablecoin issuers into the traditional financial ecosystem. By requiring reserves to be held in FDIC-insured banks and Treasury bonds, the law builds on the existing U.S. banking and financial infrastructure. This ensures that the "material structures" (the banking systems, the Federal Reserve, the Treasury) that already support the traditional dollar also support stablecoin reserves.
* AML/CFT Compliance: By classifying stablecoin issuers as financial institutions under the Bank Secrecy Act (BSA), the law requires them to implement robust AML/CFT compliance programs. This is critical to the integrity of the financial system and constitutes an "intangible foundation" of trust.
* Freeze/Burn Ability: Requiring issuers to have the technical ability to freeze or burn stablecoins at the request of judicial authorities is a measure to ensure control and security in the digital sphere, reinforcing law enforcement.
* Intangible Structures (Trust and Legal Stability):
* Legal Clarity: The definition of stablecoins as "not securities" and the preeminence of federal law over conflicting state laws is a crucial "intangible framework" that provides legal certainty. This is vital for companies to invest in developing the technological infrastructure necessary to issue and manage stablecoins.
* Supervision and Audits: Direct supervision by federal entities (OCC, Fed) for large issuers and independent audits are mechanisms for building trust. These audits and examinations ensure that issuers comply with backing and segregation requirements, which is fundamental to the "soft fabric" of public trust.
* Consumer Protection: The law introduces consumer protections, such as priority for stablecoin holders in the event of bankruptcy, which increases confidence in the system.
* Guarantee for Governments and Legal Entities:
* Financial Stability: For governments and legal entities, the GENIUS Act is an attempt to ensure financial stability in an increasingly digital world. By bringing stablecoins under a regulatory umbrella, they seek to prevent the "systemic risk" that could arise from an unregulated and potentially unstable stablecoin market.
* Oversight and Enforcement: The ability to monitor, audit, and ultimately take action against stablecoin issuers (including the ability to freeze/burn) gives governments and legal entities the tools to enforce the law, prevent illicit use, and maintain monetary sovereignty.
* Capital Attraction: By creating a clear and secure regulatory environment, the U.S. seeks to remain a hub for financial innovation and attract capital and talent in the cryptocurrency space, ensuring that the development of these structures (both tangible and intangible) occurs under its jurisdiction.
In short, the GENIUS Act is an important declaration that the U.S. government is committed to integrating stablecoins into its existing financial framework, providing the necessary safeguards for their development and stability, even as the purchasing power of the dollar itself remains subject to broader macroeconomic factors. It is an attempt to build the legal and operational "highways" and "bridges" so that stablecoins can operate safely and reliably.
A FINAL FRAME.
Eleomar Ron, excellent questions that touch on crucial aspects of the future of the crypto ecosystem and user adaptation. The GENIUS Act not only impacts stablecoins, but also creates ripples that will affect other cryptocurrencies and the user experience.
Will Other Cryptocurrencies Disappear or Will Exchanges Undergo Major Reform?
The GENIUS Act specifically focuses on payment stablecoins and defines them as "non-securities." This has direct implications for the rest of the crypto universe:
* They Will Not Disappear, But There Will Be Clarity and Differentiation:
* There's no "purge": The law doesn't seek to eliminate other cryptocurrencies (such as Bitcoin, Ethereum, or other tokens). In fact, by clearly defining what a security isn't, it sets a precedent that could help differentiate other digital assets. It's a step toward a broader regulatory framework for the entire crypto space, not a ban.
*Classification is Key: The GENIUS Act distinguishes stablecoins as a specific type of digital asset. This leaves open the question of how other assets will be classified and regulated. There will likely be increased pressure for the SEC or other agencies to issue clear guidelines or separate legislation for Bitcoin (which many consider a commodity), Ethereum (whose classification has been debated), and the thousands of other tokens.
* Exchange Reform:
* Increased Due Diligence: Exchanges operating under US jurisdiction (or serving US customers) will have to be much more rigorous in their due diligence and listing of other cryptocurrencies. If a token is classified as an unregistered security, the listing exchange could face legal action. This could lead to exchanges delisting certain tokens to avoid regulatory risks, especially those with characteristics that make them look like securities (e.g., ICOs with promises of profits, centralized governance).
* Pressure for Compliance: Cryptocurrencies and decentralized projects wishing to operate in the U.S. market or attract institutional investors will feel increased pressure to demonstrate that they are not securities or that they comply with securities laws if they are. This could drive greater decentralization, transparency, and governance to avoid problematic classifications.
* Continuous Innovation: Despite regulation, innovation in the crypto space will not stop. Clarity in one segment (stablecoins) could, paradoxically, free up capital and talent to explore other areas of blockchain and digital assets, as long as they stay out of problematic classifications.
Technological Innovations for Managing Stablecoins Against the Dollar for Users
You're right, the excerpt doesn't go into depth about the user interface, but the GENIUS Act will have important implications for how users interact with stablecoins:
* More Fluid Integration and Traditional Channels:
* Traditional Banking: Because stablecoins are so closely tied to the banking system (bank reserves, federal oversight), we're likely to see much deeper integration with traditional banking services. This could mean users being able to purchase stablecoins directly from their bank accounts, or even banks offering accounts that automatically convert deposits into stablecoins for payments.
* Improved Payment Apps: Payment apps (e.g., Venmo, Cash App, PayPal, Apple Pay, Google Pay, and their global equivalents) could begin to integrate stablecoins more directly, allowing users to send and receive dollars digitally through the blockchain, but with the familiarity of their regular payment apps. The friction of moving funds between the traditional banking system and cryptocurrency exchanges should be dramatically reduced.
* More User-Friendly Wallets: Cryptocurrency wallet technology will continue to evolve to become more intuitive. This will include simpler user interfaces, less technical jargon, and the ability to manage stablecoins as if they were "digital dollars" without the complexity of private keys for the average user (although advanced options for users who desire self-custody will persist).
* Proof of Concepts and Pilots: Given the law's approval, financial institutions and fintech companies are likely accelerating their pilots and proof of concepts to integrate stablecoins. We'll see announcements of new payment features, remittances, and even savings systems that use stablecoins.
* Less Risk, Greater Confidence:
* Perception of Security: For users, the biggest technological innovation will be the perception of security. Knowing that a stablecoin is backed by federal law, audited, and supervised, is a "technological innovation" in terms of trust. This allows users to use stablecoins without the constant worry of them losing their parity or of the issuer being fraudulent.
* Booking Transparency: While the average user won't review monthly booking reports, the availability of this information, along with audits, provides a layer of technological security that didn't previously exist consistently.
What about the new cryptophobic or misinformed users? What will become of them?
This is a key challenge, and the GENIUS Act indirectly seeks to address it:
* Increased Legitimacy and Trust:
* Positive Narrative: The passage of a federal law in the US (one of the largest economies in the world) to regulate stablecoins lends enormous legitimacy to the crypto space. This helps counter the narrative that cryptocurrencies are only for criminals or speculators. For cryptophobes, seeing government involvement and oversight can be a deciding factor.
* "Digital Dollars": Stablecoins, being pegged to the dollar, are inherently less "foreign" than other cryptocurrencies for novices. The GENIUS Act reinforces the idea that they are simply "dollars in digital form," making them more conceptually accessible.
* Proactive Education: Stablecoin issuers, exchanges, and financial institutions themselves are likely to launch educational campaigns to explain the benefits and security of stablecoins under the new legal framework.
* Ease of Use and Reduction of Complexity:
* Simplified Experience: As mentioned above, the development of more user-friendly interfaces and integration with traditional banking services will lower the technical barrier to entry. Cryptophobes are often intimidated by the complexity of private keys, blockchain addresses, and jargon. The new infrastructure will seek to minimize this.
* Less Risk of Fraud: With regulation, there will be greater scrutiny of issuers. This could reduce the number of stablecoin-related scams (although it won't completely eliminate them throughout the crypto ecosystem), making the environment safer for new users.
* Not Everyone Will Adopt Immediately:
* Despite all this, not all cryptophobes can be expected to change their minds overnight. Misinformation and skepticism persist. However, the GENIUS Act is a critical step toward eroding those barriers by providing a clear, regulated path to mass adoption.
In short, the GENIUS Act seeks to professionalize and legitimize a key segment of the crypto space. This will create clearer differentiation between digital assets and further integrate stablecoins into the traditional financial system, making the user experience safer and simpler. For skeptics, federal legitimization and ease of use will be key to eventual adoption.
THIS PRESENTATION IS A COMPENDIUM OF SEVERAL ARTICLES, HOPING TO COVER AS MUCH AS POSSIBLE.
IT IS EXTREMELY IMPORTANT TO UNDERSTAND AS MUCH AS POSSIBLE ABOUT THESE TOPICS AS WELL.
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