Author: Weilin, PANews
On July 19, U.S. President Trump officially signed the Genius Stablecoin Regulatory Act, establishing the first federal-level regulatory framework for stablecoins in the United States, marking the first cryptocurrency-related bill to become law in the U.S.
The previously controversial conflict of interest related to the Trump family's cryptocurrency project was not passed; the relevant provisions were not included in the final version of the bill.
At the same time, some crypto lawyers analyzed that the (GENIUS Act) provides incentives for stablecoin issuers to seek banking licenses. The bill brings unprecedented new signals to the U.S. crypto industry, also sparking widespread discussion about the future of stablecoin issuers and market competition.
The Genius Act has officially been signed into law, with several prominent figures in the crypto space present to witness it.
Regulation of stablecoins has been a contentious issue in the crypto industry. The (GENIUS Act), as the first federal regulatory framework for stablecoins in U.S. history, provides clearer regulatory direction for the U.S. market and fulfills Trump's crypto promises to attract voters during his presidential campaign.
On July 18 local time, U.S. President Trump stated at the bill signing ceremony: "This afternoon, we are taking a decisive step to solidify the United States' dominance in the global financial and crypto technology sectors, and we will sign the landmark (GENIUS Act) into law."
Trump added, "Since the Biden administration, they (members of the Biden administration) have come a long way; at that time, they didn’t even know what you were talking about, and half of them were arrested for no reason." Trump also stated that this signing is a "huge recognition" for the crypto industry.
Trump also saluted the senior figures of the crypto industry present, including Tether's CEO Paolo Ardoino and Coinbase's CEO Brian Armstrong. Several top company founders and executives from the crypto industry also participated in the signing ceremony, including Circle's founder Jeremy Allaire, Anchorage Digital's CEO Nathan McCauley, Coinbase's Chief Legal Officer Paul Grewal, and Coinbase's Chief Policy Officer Faryar Shirzad.
In a promotional video released by the White House, David Sacks, the White House AI and crypto chief, stated, "The bill will update outdated payment infrastructure with a revolutionary new payment system and will expand the dominance of the dollar globally."
The Genius Act establishes a federal regulatory framework for stablecoins, requiring that stablecoins must be fully backed by U.S. dollars or similar liquid assets, mandating that issuers with a market capitalization exceeding $50 billion must undergo annual audits, and setting guidelines for foreign entities issuing stablecoins.
On Thursday local time, the (GENIUS Act) passed the U.S. House of Representatives with 308 votes in favor and 122 against. The bill has passed the Senate, so it will be sent to Trump for signing after passing the House. The process of the (GENIUS Act) and the advancement of the Clarity Act and anti-central bank digital currency (CBDC) bill encountered some obstacles, as some conservative Republican members voted against in two procedural votes.
The Genius Act will take effect 18 months after Trump's signing or 120 days after the "primary federal stablecoin regulatory authority" (including the Treasury and the Federal Reserve) issues final regulations implementing the act.
The dual licensing structure allows for interstate regulation, failing to successfully avoid Trump's family conflict of interest.
Before the bill was signed, crypto advocates expressed their support on the X platform. Jeremy Allaire posted on X: "Heading to the White House to participate in the historic signing ceremony of the (GENIUS Act), one of the most transformative pieces of legislation in decades."
Nic Puckrin, founder of Coin Bureau, stated that the (GENIUS Act) could drive stablecoins into the mainstream by enhancing trust in currencies and encouraging more competition in the market.
"Currently, the stablecoin market is actually a duopoly, almost completely dominated by Circle's USDC and Tether's USDT," Puckrin said. Since the bill will provide a clear path for banks and other entities to issue stablecoins, "we are likely to see a flood of stablecoins entering the market," he said.
Large banks are preparing to issue their own stablecoins. While not all may succeed, Puckrin said, they will provide consumers with more choices and help them find the stablecoin and issuer that best meets their needs.
However, critics of the (GENIUS Act) argue that it contradicts the decentralized purpose of cryptocurrency and could lead to corruption, such as officials favoring certain specific stablecoins under the new regulations.
"We need to ensure that government officials are not publicly soliciting people to buy their currency to enhance personal or family profits," said Oregon Senator Jeff Merkley, who opposed the bill during the Senate debate, "Where are these safeguards in this bill? None at all."
Some critics also point out that the bill grants excessive powers to entities to issue new stablecoins, which could make enforcement of regulatory standards more challenging.
Notably, the amendment to avoid Trump's conflict of interest was not passed. Before the (GENIUS Act) was passed on Thursday local time, some Democrats expressed concerns about the stablecoin USD1 under Trump family DeFi project World Liberty Financial. Maxine Waters, a Democrat on the House Financial Services Committee, raised potential conflict of interest issues and conveyed other concerns regarding foreign issuers.
Additionally, Todd Phillips, a professor of banking and administrative law at Georgia State University, pointed out that this new law will authorize the Office of the Comptroller of the Currency (OCC) to regulate stablecoin issuers nationwide, but the Trump administration has been increasingly inclined to weaken the independence of regulatory agencies, including firing agency heads. "The president has an indirect financial relationship with stablecoin issuers, which is a very big problem," Phillips said, "this stablecoin issuer might apply for a license from the OCC, and if the OCC does not approve, the president could fire the comptroller."
He also raised concerns about the structure of the new law, which creates a dual licensing structure for some stablecoin issuers, allowing them to seek federal or state regulation. He indicated that this could lead to different jurisdictions competing with 'low standards' to attract crypto companies.
Bank licenses will be sought after by stablecoin issuers, while DeFi platforms face uncertainty.
Logan Payne, a cryptocurrency lawyer at Winston & Strawn, stated that the (GENIUS Act) provides incentives for stablecoin issuers to seek banking licenses. He noted that the stablecoin licenses established under the (GENIUS Act) would restrict companies' activities to 'pure stablecoin issuance,' but most stablecoin issuers do more than that.
"Almost every issuer of stablecoins in the U.S. under U.S. law is engaged in activities beyond the scope of that license," Payne said. Even if issuers obtain a license approved by the (GENIUS Act), Payne noted that they still need state-level money transmission licenses to operate nationally.
This provides incentives for stablecoin issuers to apply for a national trust bank license, which companies like Circle and Ripple are doing, "This allows them to engage in stablecoin issuance and broader activities without needing licenses across states," he said.
Bridget Harris, an investment manager at Founders Fund, holds a similar view. Bridget wrote on the X platform, "Everyone is vying to become a bank: many entities in the U.S. will become stablecoin issuers (banks, payment service providers, fintech companies, retailers, etc.). The (GENIUS Act) establishes a banking-like regulatory framework for stablecoin issuers (but prohibits activities like lending). Since they are regulated like banks, it would be better to just become a bank to do more things."
She stated that the issuer's application to establish a bank could bring the following benefits: the ability to pay interest on stablecoin deposit accounts/tokenized deposits (since the (GENIUS Act) prohibits stablecoin issuers from sharing profits, they also need to become banks to do so); direct settlement with 'real dollars' at the Federal Reserve; and broader capabilities, including lending.
For some crypto users, a controversial part of the bill is the prohibition against stablecoin issuers (whether foreign issuers or those regulated under U.S. law) offering interest or yield to holders and users.
Yield offerings are one of the marketing tactics stablecoins use to attract users. Some stablecoins intrinsically provide yields to holders, while others, like Circle's USDC, reward users who hold stablecoins in exchanges like Coinbase and Kraken. The aforementioned lawyer Payne said, "In the coming years, there will be more legislation and regulation to fill some gaps in response to the challenges of DeFi." One such bill is the (CLARITY Act), which categorizes digital assets and stipulates the relevant regulatory bodies. This bill was passed by the House and sent to the Senate on Thursday local time.
Regarding the exemptions for foreign stablecoin issuers, Payne also conducted an analysis. Within three years after the bill's signing, any stablecoin not issued by an approved issuer will be banned from being offered in the U.S. Additionally, foreign-issued stablecoins will also be banned from being offered in the U.S. unless the issuer is able and willing to comply with the legal requirements of the bill.
The bill provides some exemptions for foreign stablecoin issuers, including if the Treasury finds that their home country has a comparable regulatory framework. If so, foreign issuers can register with the Office of the Comptroller of the Currency (OCC) and successfully obtain approval, receiving a response within 30 days, and hold sufficient reserves at U.S. financial institutions to cover their U.S. customers, thereby providing services to the U.S. market.
Overall, the (GENIUS Act) marks a new historical phase in U.S. stablecoin regulation, although the bill has sparked controversy in some aspects, particularly regarding potential conflicts of interest involving the Trump family, it may also provide arbitrage opportunities for future stablecoin issuers. As the regulatory environment changes, PANews will continue to monitor subsequent developments.
(The above content is excerpted and reprinted with permission from partner PANews, original link)
"Trump officially signs the (GENIUS Act): What new opportunities are there for stablecoin issuers?" This article was first published in (Block Guest).
