Written by: Luke, Sam, Li Zhongzhen, Fat Meimei
Web3 Compliance Research Group, kicking off the first roundtable column!
[Web3 Compliance · Roundtable Discussion] is a monthly dialogue column focused on industry hotspots. Each issue, we invite 4 to 6 members from the compliance research group with varied backgrounds in law, technology, projects, finance, etc., to respond to and debate core questions, systematically organizing diverse viewpoints to present compliance insights with depth, perspectives, and practical value.
Recently, the US House of Representatives passed three legislative drafts concerning crypto regulation by an overwhelming majority, namely the (Genius Act), (Clarity Act), and (Anti-CBDC Surveillance State Act). Among them, the (Genius Act), referred to as an important step in consolidating the US's dominant position in the global financial and crypto technology sectors, was officially signed into effect by Trump on the 18th, and has also been reported by domestic media such as CCTV and Caijing.
In this issue, we posed five questions to the outstanding members of the Web3 Compliance Research Group: 'What does the (Genius Act) aim to do?', 'How to understand the regulatory division between SEC and CFTC according to the (Clarity Act)?', 'Why does the US oppose CBDCs?', 'Will the three acts inspire other countries to reference in crypto regulation?', 'How will they affect the operations of crypto startup projects?'
Now let's get to the point!
Q1: Can you explain in plain terms what the (Genius Act) aims to do? Do stablecoins from countries outside the US still have a chance of competition?
Luke:
Simply put, the (Genius Act) is a set of strict legal frameworks established by the US government for stablecoins (such as USDT and USDC) and their issuers. It clarifies the definition of stablecoins and legally recognizes them. This aims to protect both issuers and consumers using stablecoins.
The main parts can be divided into three segments.
Firstly, the bill defines stablecoins as 'payment stablecoins.' It clearly states that stablecoins do not possess securities or commodity attributes, indicating that they do not have investment appreciation attributes.
Secondly, it strictly mandates that stablecoin issuers manage consumer redeemable principal with a 1:1 high liquidity ratio and must publicly disclose ledgers monthly to ensure this 1:1 high liquidity. Furthermore, if a stablecoin issuing company has a market value exceeding $50 billion, it must also submit an annual audit report and undergo dual state and federal regulation to prevent 'decoupling' collapses like Terra/Luna.
It also states that if a company issuing stablecoins goes bankrupt, users' funds have priority for compensation, essentially providing a safety net for users. There are also requirements for anti-money laundering (AML) and identity verification (KYC), similar to banks, ensuring transaction transparency and preventing bad actors from exploiting loopholes.
Sam:
The Genius Act's role is to provide compliance regulation for the issuance and trading of stablecoins, and it currently appears to be very strict. It requires that any stablecoin intended for issuance or circulation in North America must obtain federal or state licenses, such as obtaining qualifications as a formal bank or regulated financial institution. This means that to continue in the stablecoin business, one must be fully backed, disclose information, and comply with AML regulations.
This wave is entirely aimed at Tether, as its market value is around 1,600. In previous industry cycles, there has always been a risk of collapse, mainly revolving around the transparency of Tether's reserves and the auditing being done by the same entities. Tether is often mocked in the industry, and its annual KPI involves causing a collapse and then buying back chips at a low price.
Moreover, Tether, as the leading stablecoin, holds more than 70% of the stablecoin market. It seems that such an unstable stablecoin can achieve this scale, which must make consortiums envious. However, for consortiums to enter the market, they must first design good market rules, so they can legally obtain profits. Therefore, the essence of the Genius Act is to provide an entry ticket for new players or so-called Old Money.
The essence of stablecoins in countries outside North America is the same because the mainstream stablecoins are still pegged to fiat currencies. Strong fiat means strong corresponding stablecoins, while weak fiat means corresponding stablecoins have no competitive opportunities, such as the Naira in West Africa, which is simply out of the question. However, as long as there are sufficient US dollar reserves, anyone can issue USD stablecoins. Ultimately, it depends on whether people trust your foreign exchange reserves, and there is also the issue of migration costs. The education cost and migration cost of stablecoins are very high. Therefore, crypto-friendly countries and regions have a stronger competitive advantage.
Lawyer Li Zhongzhen:
The (Genius Act) establishes the concept of payment stablecoins and details the requirements and regulatory systems for issuing payment stablecoins in the US. The act stipulates that issuers of payment stablecoins must maintain at least a 1:1 reserve of high liquidity assets, which may only include US dollars, US Treasury bills of 93 days or shorter, and other highly liquid dollar assets. The aim of the (Genius Act) is to siphon global capital into strong liquidity dollar assets, further enhancing dollar liquidity and establishing the dominance of on-chain dollars to consolidate dollar hegemony.
Do stablecoins from countries outside the US still have a chance of competition? This question actually depends on the comprehensive strength of these countries and regions in reality. I believe that China, the EU, and Japan still have opportunities, while other countries and regions do not.
Fat Meimei:
In the past few years, no one could clearly explain what stablecoins are, what threshold the issuers have, who is responsible for regulating stablecoins, and what to do when problems arise? The (Genius Act) aims to end the regulatory vacuum and solve these problems.
Indeed, while the (Genius Act) further reinforces the US dollar's dominant position in the global reserve and payment system by mandating stablecoin reserves in US Treasuries and dollar assets, it also consolidates the dollar's international monetary hegemony. However, the main function of stablecoins is to facilitate cross-border payments and settlements, enhancing the flexibility and efficiency of trade settlements without altering national monetary policy. Many countries worldwide are currently laying out plans for stablecoin development. As the world's largest goods trading nation, China has a natural strategic need for optimizing cross-border settlement efficiency and costs, presenting us with significant opportunities—opportunities that lie in Hong Kong.
On May 21 this year, the Hong Kong Legislative Council passed the (Stablecoin Conditions Draft), becoming the world's first jurisdiction to implement full-chain regulation of stablecoins. Hong Kong plays a key role in promoting the trend of stablecoin development, and China has unique advantages and strong competitiveness.
Q2: How to understand the regulatory division between SEC and CFTC according to the (Clarity Act)? What impact will the definition of 'mature blockchain' have on the industry?
Luke:
In simple terms, the (Clarity Act) is essentially to address the 'gray area' of digital asset regulation by explicitly delineating the responsibilities of the US Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC), avoiding regulatory overlap or vacuum, thereby allowing the crypto industry to develop more orderly. In brief, the SEC mainly regulates digital assets with investment return expectations, like certain tokenized securities, and the CFTC is responsible for those that resemble 'commodities,' such as Bitcoin or Ethereum, where value primarily arises from actual use rather than dividends. This helps to refine the legal framework defining the cryptocurrency market and its positioning, along with a series of reduced regulations on DeFi to encourage the landing and innovation of DeFi projects.
It is necessary to mention the definition of 'mature blockchain' in the bill. The bill defines 'mature blockchain' as a network confirmed through a certification process submitted to the SEC that meets statutory conditions (such as decentralized governance, distributed ownership, and no single entity control). The SEC can also formulate additional rules to refine these standards. Specifically, the certification includes proving the degree of decentralization of the network, market adoption rate, openness, interoperability, etc. If the certification is passed (usually defaulting to take effect after a period unless the SEC raises an objection), this blockchain is considered 'mature'.
Sam:
Dividing boundaries and managing separately is just a typical decentralization. The SEC manages security tokens, while POS algorithms, DeFi, and the like are classified as commodities under CFTC regulation.
Mature blockchains are relatively favorable for POW algorithm projects because POW is the most original cryptocurrency and completely distributed. These projects pursue technical perfection, optimizing algorithms and performance, practicing Code Is Law. The industry has long believed that the success of the technology stack does not equate to the success of the chain, and various forms of securities regulation often intervene, resulting in a contraction of the entry channels for technical personnel. Those with real technical skills are reluctant to enter, fearing being struck down. Now, it’s good; everyone can confidently write code without worrying about SEC knocking on their door. Miners can also expand production freely, alleviating some pressure on the chip industry, and hardware prices will likely decrease. The payback period for POW has doubled from the last cycle to the recent year, and it seems poised to decrease.
After that, everyone plays their own game, SEC takes POS to the financial market to compete for APY, CFTC brings POW back to the original intention of blockchain.
Lawyer Li Zhongzhen:
The (Clarity Act) has ended the confusion over the regulatory division between the SEC and CFTC in the crypto field, clarifying that digital commodities are managed by the CFTC, while restricted digital assets are handled by the SEC. This further improves the regulatory framework of the US crypto field. A clear regulatory environment is conducive to the development of the crypto industry. Any emerging industry fears not regulation itself, but the anxiety caused by unclear regulatory responsibilities.
The definition of 'mature blockchain' brings a relatively objective standard to the industry, namely that the largest holder's proportion of holdings must not exceed 20%, and no individual or entity can unilaterally control the blockchain or its applications. 'Mature blockchain' allows projects initially issued as securities to transition to commodities after meeting the 'mature blockchain' standards, shifting from SEC regulation to CFTC regulation. This is very friendly to the crypto industry, as being defined as a security under SEC regulation incurs high compliance costs that many startups cannot afford. In contrast, if defined as a commodity under CFTC regulation, compliance costs are relatively reduced.
Fat Meimei:
In simple terms, the bill labels digital assets, and the (Clarity Act) clearly divides digital assets into different categories, delineating the regulatory scope of the SEC and CFTC. The CFTC primarily regulates securities-like products, which have higher and stricter requirements, while the SEC's regulation is much more lenient. Therefore, I believe that the division of responsibilities provides a more lenient compliance pathway for projects genuinely dedicated to blockchain, and the most ingenious design of the bill is to create a pathway for digital assets to evolve from securities to commodity status, providing a 'graduation channel' for these projects from 'securities' to 'digital commodities.'
The concept of a mature blockchain system is mainly used to determine whether the blockchain has reached the level of decentralization, thus deciding whether its tokens can transition from 'securities' to 'digital commodities.' Today, blockchain technology is becoming increasingly widespread, and this industry is undergoing a paradigm shift, meaning that standards or dimensions and characteristics are required to distinguish whether a blockchain is reliable and has reached maturity. The bill provides definite definitions, clarifying details and evaluation standards, allowing entrepreneurs to better understand how to meet these standards, thereby providing greater certainty for ICOs and IDOs.
Q3: The US's (Anti-CBDC Act) seems to sharply contrast with the attempts of some countries to promote CBDCs. Why oppose CBDCs? Do you have anything else to say?
Luke:
The main reasons for the United States' ban on CBDCs are as follows. First, there are concerns arising from the Federal Reserve's increased power over the privacy of personal financial assets. Second, there are worries about the stability of the financial system. Third, there are concerns about global monetary centralization.
First, privacy and surveillance risks are core opposition points. CBDC is essentially a digital banking system directly issued by the central bank (similar to stablecoin issuers, but CBDC is at the national level), capable of tracking every transaction in real time. This could be abused for government surveillance or various human error risks, infringing on personal financial privacy and freedom. Supporters of the bill believe this would create a 'surveillance state,' similar to China's digital yuan, which is convenient but also strengthens the central bank's transaction monitoring capabilities. In contrast, the US emphasizes protecting constitutional rights and personal privacy, avoiding excessive government interference in private financial assets.
Secondly, CBDCs will strengthen 'disintermediation' and influence the implementation of the Federal Reserve's monetary policy. Directly serving individual consumers will directly weaken the role of commercial banks, possibly leading to a loss of deposits, intensified competition among banks, and even trigger a wave of bank failures, disrupting the existing economic structure. The Federal Reserve's 2022 report pointed out that such a transformation is too radical and may amplify systemic risks. CBDCs are mainly used to enhance payment efficiency and financial inclusion, but the US believes these benefits do not outweigh the potential harms.
There are also concerns about the concentration of power and global competition. Opponents of CBDCs worry that they will strengthen central banks' control over monetary policy and even foster digital hegemony internationally, where a country's CBDC dominates global trade and threatens national sovereignty. The US chooses to maintain the traditional position of the dollar through anti-CBDC measures and promotes private stablecoins (such as USDC) as alternatives to foster market-driven innovation.
Sam:
The Federal Reserve is not affiliated with any political party, nor does it engage in political donations; it will definitely prioritize those who have paid the 'protection fee.' If the Federal Reserve steps in, no one else will be able to play. Moreover, stablecoins still have some decentralized attributes, such as algorithmic stablecoins and cryptocurrencies pegged stablecoins. In the future, there will still be room for development with new technologies, algorithms, or plans. CBDCs, on the other hand, are completely centralized, which goes against the principles of crypto. Decentralized assets are at the core of these three acts, and private privacy, free finance, and resistance to censorship are all demands. Releasing CBDCs would have an impact on the whole.
Simply put, if the Federal Reserve issues currency, it’s akin to pulling down pants to fart; these three acts will become mere decorations.
Lawyer Li Zhongzhen:
The US government does not have the authority to issue dollars; that power lies with the Federal Reserve. One major reason the US government is pushing the (Genius Act) is to expand the dollar without the Federal Reserve's involvement. If CBDCs were allowed, it would greatly benefit the Federal Reserve but not provide many practical benefits to the US government. Only by restricting the Federal Reserve can the government achieve financial independence.
Some countries trying to promote CBDCs have their currency issuance rights in the hands of the government, so there is no conflict of interest in issuing CBDCs in these countries.
Fat Meimei:
In China, everyone knows about the digital yuan, and the government has been promoting it; this is actually an example of a CBDC. CBDCs indeed have obvious benefits, such as convenience and efficiency in payment settlements. Given these clear advantages, why oppose them? We need to look at this issue from a more macro perspective. Generally, individuals find it very difficult to connect directly with the central bank, and commercial banks play an intermediary role in this process. A CBDC is essentially a blockchain online banking service system operated by the central bank. If every individual can directly interface with the central bank for deposits and loans, commercial banks will gradually become redundant, and I believe a significant portion of commercial banks may be forced to close. Such a scenario would directly harm the stability of the existing economic and financial system. Furthermore, the CBDC system is not entirely decentralized. If the CBDC is issued and gains circulation, how can personal financial assets be protected? KYC and AML will still be required, so what is the difference compared to our current online banking?
It’s akin to merely adding blockchain technology to an already digitized banking system without any substantial enhancements. The final outcome may be that there is neither improvement nor the creation of numerous potential problems, which is like trying to catch a thief and ending up losing money. Personally, I lean towards steady progress and do not advocate for the blind large-scale implementation of CBDCs or adopting the 'sandbox' approach used in Hong Kong.
Q4: Will this lead to regulatory references in regions like the EU and Asia? How will this affect the global Web3 regulatory landscape?
Luke:
The (Genius Act), (Clarity Act), and (Anti-CBDC Act) passed in the United States in 2025 may inspire the EU and Asian countries to reference its cryptocurrency regulatory model. The EU's MiCA regulations may be refined to match US standards, while Japan and Singapore may emulate stablecoin regulation. India may balance innovation and compliance, and China may seize the opportunity against CBDCs to expand the influence of the digital yuan, and it is also possible that, like the US, it will vigorously develop the use of renminbi stablecoins.
The global Web3 regulatory landscape will trend towards standardization, encouraging private stablecoins and DeFi. However, the US's anti-CBDC stance may leave it 'behind' in CBDC payment systems, while simultaneously elevating the status of other private crypto asset platforms. This may spark global regulatory competition, directing capital towards regulatory-friendly regions and potentially exacerbating geopolitical friction, testing the US's leadership in the digital economy.
Sam:
The EU may not necessarily, while some Asian crypto regulations may need to reference it, because the EU has regulated cryptocurrencies for quite some time. In 2014, Germany became the first country to accept Bitcoin as currency, followed by the Netherlands, France, and others. Statistics from last year show that there are over 2,700 crypto licenses across Europe, and Canada's licenses and regulations were established earlier and are more numerous than those in North America. However, Asia does need to reference these, as the entire region currently has the least, with only Poland having more. From this data, it can be seen that in terms of crypto regulation or crypto-friendliness, the US can only be considered to have followed the lead of the fleet, because their own size is large, and a big ship is hard to turn.
However, the regulation of stablecoins will reference North American legislation because compliance with this area is necessary, as mainstream stablecoins are primarily pegged to the US dollar, which is itself heavily regulated. North America's actions will also accelerate the implementation of regulations around the world, mainly regarding stablecoins, and possibly introduce a cryptocurrency tax. Regulatory standards in major countries and regions will quickly align, making the entire industry more standardized and transparent. It will become very difficult for the hundred-fold coins of the past to emerge again. Web3 will no longer be a path to quick wealth but will develop more sustainably.
Lawyer Li Zhongzhen:
In terms of stablecoin regulation, Hong Kong is ahead of the game, but when it comes to crypto regulation beyond stablecoins, the US is the fastest country to establish a detailed regulatory framework globally. Other countries can improve their regulatory frameworks based on their national conditions by referencing the US regulatory model, such as implementing tiered and categorized regulation of crypto assets, clarifying regulatory agencies and systems.
The US has fired the first shot, and I believe other countries will follow soon. It won't be long before the global Web3 regulatory landscape continuously improves, potentially leading to mutual recognition of regulatory compliance.
Fat Meimei:
The Genius Act establishes a solid regulatory framework for stablecoins, while the Clarity Act clearly defines categories of digital assets, corresponding regulatory agencies, and the regulatory responsibilities of different institutions. The Anti-CBDC Act explicitly prohibits the Federal Reserve from issuing central bank digital currency to individuals, preventing excessive surveillance of finance while maintaining the role of commercial banks in the financial system.
Previously, there was uncertainty in US regulation; on one hand, the regulatory standards varied across states, and on the other, there was ongoing debate over whether cryptocurrencies are securities or commodities. This uncertainty has led many entrepreneurial entities to migrate to regions with more regulatory friendliness. The implementation of these three acts may help the US regain the lead in digital asset innovation, and the regulatory framework may become a global reference template, also prompting other countries to expedite the improvement of laws related to crypto assets. The digital asset ecosystem in the US and even globally may welcome significant change.
Q5: The three acts are regarded as a turning point for the US and even the entire crypto industry, transitioning from 'wild growth' to 'rule-driven.' How will they impact compliance costs and operational models for Web3 startup projects?
Luke:
Clearly, these three acts will transition the US crypto industry from 'wild growth' to 'rule-driven,' significantly impacting compliance costs and operational models for Web3 startup projects. In the short term, due to stablecoin disclosures, auditing, and KYC/AML requirements, compliance costs will increase startup expenses (legal costs can account for 40% of financing), leading small projects to potentially flow out due to heavy burdens. However, in the long run, regulatory clarity reduces litigation risks and attracts VC investment. Operational models will shift from ambiguous to compliant, focusing on decentralized governance and RWA tokenization for exemptions (such as ICO caps of $75 million), transitioning from rapid iteration to innovation within legal rules.
This may squeeze small projects in the short term, but in the long run, it will enhance industry maturity, attract global resources, and establish an internationally recognized regulatory framework, which may influence other regions' legal compliance in the cryptocurrency market (e.g., EU MiCA, Singapore DTSP, etc...).
Sam:
Marks a certain degree of transition in Web3 entrepreneurship from 'disorderly innovation' to a new era of 'compliance first'.
Several aspects can be foreseen, such as significantly higher entry barriers for startups, making it impossible to issue tokens at will, with licenses becoming standard; compliance costs will also skyrocket, with lawyers, audits, KYC/AML, etc., becoming necessary budget items; the industry will accelerate the elimination of non-innovative or unprofitable small projects or gray projects; however, POW miners should be the group that benefits the most, especially Bitcoin. Only compliant businesses can scale up, and only compliant businesses can go further, while avoiding the situation where bad money drives out good.
However, for the 'Crypto Native' community, Web3 is Web3, business is business, crypto is crypto, technology is technology; native crypto is permissionless, and true crypto will find where it can happen.
Lawyer Li Zhongzhen:
With the implementation of the (Genius Act), (Clarity Act), and (Anti-CBDC Act), project teams need to determine their compliance paths based on their project types:
Projects issuing stablecoins must invest a significant amount of funds to obtain the corresponding licenses, and also establish independent audit systems and bankruptcy isolation mechanisms, especially regarding the reserve asset requirement, where a 1:1 reserve ratio poses high demands on the project's financial strength.
For non-stablecoin projects, project teams need to clearly understand whether they are securities or commodities. In the absence of regulation, project teams might only need to assemble technical development teams, security teams, and marketing teams to tell narratives, raise funds, and go on-chain, but that is no longer feasible now. Therefore, at the project's early stage, teams must establish professional compliance teams to address SEC or CFTC regulation, potentially incurring compliance costs higher than R&D costs, making it difficult for undersized projects to incubate.
Fat Meimei:
Yes, these three acts collectively establish clear [rules of the game] for the crypto industry. For the past few years, the crypto industry has lacked clear rules, leading legitimate entrepreneurs to face unpredictable regulation, while speculators exploit the ambiguity in the law for profit. These three acts will reverse this situation.
The bill sets detailed requirements for stablecoin issuers, trading platforms, and DeFi projects, also listing many prohibited behaviors. The asset reserve requirements and fund segregation system increase financial and management costs, while financial information disclosure and auditing raise operational costs. For digital assets that were previously in a gray area, more resources need to be invested to determine regulatory attributes, increasing compliance costs. Additionally, countries or institutions planning to issue central bank digital currencies may need to readjust their strategies and plans, increasing compliance costs and uncertainty. The increase in compliance costs may force some smaller projects to exit the market, but it also provides a clear path for high-quality projects to establish long-term operational models based on legal provisions, allowing projects to operate sustainably.
