Written by: Luke, Sam, Li Zhongzhen, Pang Meimei

Recently, the U.S. House of Representatives overwhelmingly passed three legislative proposals regarding crypto regulation, namely the Genius Act, the Clear Act, and the Anti-CBDC Monitoring National Act. Among them, the Genius Act, referred to as 'a significant step in consolidating the U.S.'s dominant position in the global finance and crypto technology fields,' was officially signed into law by Trump on the 18th and has been reported by domestic media such as CCTV and Caijing.

In this session, we posed five questions to the outstanding members of the Web3 Compliance Research Group: 'What does the Genius Act aim to do?' 'How should we understand the regulatory division between the SEC and CFTC as outlined in the Clear Act?' 'Why does the U.S. oppose CBDCs?' 'Will the three acts provoke other countries to reference their crypto regulations?' 'How will they affect the operations of crypto startup projects?'

Now let's get to the main topic!

Q1: Can you explain in straightforward terms what the Genius Act aims to do? Do countries outside the U.S. still have competitive opportunities for stablecoins?

Luke:

The Genius Act essentially establishes a strict legal framework for stablecoins (like USDT and USDC) and their issuers. It clearly defines stablecoins, ensuring they are legally recognized. This aims to protect the rights of both issuers and consumers using stablecoins.

The main parts consist of three sections.

First, the legislation defines stablecoins as 'payment stablecoins.' It clearly states that stablecoins do not possess securities or commodity attributes, indicating that stablecoins themselves do not have investment appreciation characteristics.

Second, it strictly establishes that stablecoin issuers must manage consumer redemption of stablecoin principal with a 1:1 high liquidity method. They must also publicly disclose their accounts monthly to ensure this 1:1 high liquidity. Furthermore, if the market value of the stablecoin issuing company exceeds $50 billion, it must also submit annual audit reports and undergo both state and federal dual regulation to prevent a collapse like Terra/Luna's 'decoupling.'

Third, it states that if a stablecoin issuing company goes bankrupt, users' funds have priority for compensation, effectively providing a safety net for users. There are also anti-money laundering (AML), identity verification (KYC), and other requirements, 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 stringent. It requires that stablecoins intended for issuance or circulation in North America must obtain federal or state-level licenses, such as qualifying as a regulated bank or financial institution. This means that to continue operating in the stablecoin business, entities must be fully backed, comply with information disclosure, and adhere to AML regulations.

This wave is entirely aimed at Tether, which currently has a market value of around $1,600. In previous industry cycles, there was always a risk of explosive failures, primarily surrounding the opacity of Tether's reserves and the audits being conducted by companies with conflicts of interest. Tether has often been mocked within the industry, with its annual KPI revolving around triggering a failure and then buying back chips at low prices.

Moreover, Tether, as the leading stablecoin, holds over 70% of the stablecoin market. Given that such an apparently unstable stablecoin can reach this scale, there are surely consortia eager to enter the market. However, for consortia to enter, they must first design market rules to legally gain profits. Thus, the essence of the Genius Act is to provide entry tickets for new players or old money.

Stablecoins outside North America are essentially the same since the mainstream stablecoins remain fiat-pegged. Strong fiat leads to strong corresponding stablecoins; weak fiat results in weak stablecoins, as seen with the Nigerian naira. However, as long as there are sufficient dollar reserves, anyone can issue dollar-pegged stablecoins. Ultimately, it depends on whether people trust your foreign reserves, along with high education and migration costs for stablecoins. Thus, crypto-friendly countries and regions have a stronger competitive advantage.

Lawyer Li Zhongzhen:

The Genius Act (Genius Act) establishes the concept of payment stablecoins and details the requirements and regulatory systems for issuing payment stablecoins in the U.S. The Genius Act stipulates that issuers of payment stablecoins must have a reserve asset ratio of at least 1:1, with reserve assets limited to strong liquidity dollar assets like the U.S. dollar and U.S. Treasury bonds maturing in 93 days or less. 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, thereby consolidating dollar hegemony.

Do countries outside the U.S. still have competitive opportunities for stablecoins? This actually depends on the comprehensive strength of these countries and regions in reality. I believe China, the EU, and Japan still have opportunities, while other countries and regions do not.

Pang Meimei:

In recent years, no one has been able to clarify what stablecoins are, what thresholds issuers should have, who should be responsible for regulating stablecoins, or what should be done when issues arise. The Genius Act is designed to end regulatory vacuums and solve these problems.

Of course, while the Genius Act strengthens the requirement for stablecoin reserves to be U.S. Treasury bonds and dollar assets, further solidifying the dollar's dominant position in the global reserve and payment systems, it also reinforces the international monetary hegemony of the dollar. However, the main purpose of stablecoins is for cross-border payments and settlements, which can enhance the flexibility and efficiency of trade settlements without altering national monetary policies. Many countries around the world are now positioning themselves for the development of stablecoins. As the world’s largest trading nation, China has a natural strategic demand for optimizing cross-border settlement efficiency and costs. We have a tremendous opportunity, which lies in Hong Kong. On May 21 of this year, the Hong Kong Legislative Council passed the Stablecoin Conditions Draft, making it the world's first jurisdiction to implement full-chain regulation of stablecoins. In promoting the development of stablecoins, Hong Kong plays a key role, and China has unique advantages and strong competitiveness.

Q2: How to understand the regulatory division between the SEC and CFTC as outlined in the Clear Act? What impact will the definition of 'mature blockchain' have on the industry?

Luke:

In simple terms, the Clear Act is essentially designed to resolve the 'gray area' of digital asset regulation by clearly delineating the responsibilities of the SEC and CFTC, preventing regulatory overlap or vacuums and enabling the crypto industry to develop more orderly. In simple terms, the SEC mainly oversees digital assets that resemble stocks and have investment return expectations (such as certain tokenized securities), while the CFTC is responsible for assets that are more akin to 'commodities,' such as Bitcoin or Ethereum, whose value primarily derives from actual usage rather than dividends. This helps to refine the legal definitions and positioning of the entire cryptocurrency market. Additionally, it includes a series of reduced regulations for DeFi to encourage the landing and innovation of DeFi projects.

Notably, the definition of 'mature blockchain' in the legislation specifies that a 'mature blockchain' is 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 promulgate additional rules to refine these standards. Specifically, certification includes proving the level of decentralization of the network, market adoption rates, openness, and interoperability. If certification is passed (usually defaulting to effectiveness after submission unless the SEC objects), the blockchain is considered 'mature.'

Sam:

Each sector manages its own, typical decentralization. The SEC regulates security tokens, POS algorithms, and DeFi; decentralized projects that meet the definition of mature blockchains fall under commodity regulation by the CFTC.

Mature blockchains are relatively favorable for POW algorithm projects, as POW is the most original form of cryptocurrency, completely decentralized. These types of projects aim for technological perfection, optimizing algorithms and performance while practicing Code Is Law. The industry has always believed that the success of the technology stack does not equate to the success of the chain, and various types of securitization regulations can suddenly arise, leading to a contraction in the entry channels for technical personnel. Those who are truly skilled in technology are hesitant to enter, fearing being hit hard. Now, however, everyone can write code with peace of mind without worrying about the SEC knocking on the door. Miners can also expand production without restraint, alleviating some pressure on the chip industry, and hardware prices will stabilize somewhat. The payback period for POW has doubled from the previous cycle to the most recent year and is expected to decline.

Then, everyone goes their own way, with the SEC bringing POS to the financial market to roll out APY, while the CFTC returns POW to the essence of blockchain.

Lawyer Li Zhongzhen:

The Clear Act (Clear Act) addresses the chaotic division of regulatory responsibilities between the U.S. SEC and CFTC in the crypto space by clarifying that digital commodities are managed by the CFTC, while restricted digital assets are handled by the SEC. This further improves the regulatory framework for the U.S. crypto sector. A clear and defined regulatory environment will help the development of the crypto industry. Emerging industries do not fear regulation; they fear the anxiety caused by unclear regulatory responsibilities.

The definition of 'mature blockchain' provides the industry with a relatively objective standard, i.e., the maximum holding ratio of the largest holder must not exceed 20%, and no individual or entity can unilaterally control the blockchain or its applications. A 'mature blockchain' allows projects initially issued as securities to transition to commodities after meeting the standards of 'mature blockchain,' shifting regulatory oversight from the SEC to the CFTC. This is very friendly to the crypto industry because a project defined as a security regulated by the SEC incurs very high compliance costs, which many startups cannot afford. However, if defined as a commodity regulated by the CFTC, compliance costs can be significantly reduced.

Pang Meimei:

In simple terms, this legislation labels digital assets, with the Clear Act clearly categorizing digital assets into different classes and delineating the regulatory scope of the SEC and CFTC. The CFTC primarily regulates securities-like products, with higher and stricter requirements, while the SEC's regulations are much more lenient. Therefore, I believe that the division of regulatory responsibilities provides a more relaxed compliance pathway for projects genuinely committed to blockchain technology. The most ingenious aspect of this legislation is that it creates an evolutionary path for digital assets from securities properties to commodity properties, thus providing a 'graduation channel' for these projects to transition from 'securities' to 'digital commodities.'

The concept of a mature blockchain is mainly used to determine whether a blockchain has reached a level of decentralization, thereby deciding whether its tokens can transition from 'securities' to 'digital commodities.' Nowadays, blockchain technology is becoming increasingly widespread, and the industry is experiencing a paradigm shift regarding the standards or dimensions used to differentiate reliable blockchains that have matured. The legislation provides a clear definition and specifies details and assessment criteria, enabling entrepreneurs to better understand how to meet these standards and providing greater certainty for ICOs and IDOs.

Q3: The U.S. Anti-CBDC Act seems to starkly contrast with the attempts of some countries to promote CBDCs. Why oppose CBDCs? What else do you want to say?

Luke:

The U.S. ban on CBDCs primarily stems from three concerns. First, there is worry about the increased power of the Federal Reserve over personal financial privacy. Second, there are concerns over the stability of the financial system. Lastly, there is concern over the centralization of global currencies.

First, privacy and surveillance risks are core opposition points. A CBDC is essentially a digital banking system directly issued by the central bank (similar to stablecoin issuers, but at the national level), capable of tracking every transaction in real-time. This could be misused for government surveillance or various human error risks, infringing on personal financial privacy and freedom. Proponents of the legislation argue that this would create a 'surveillance state,' akin to China's digital yuan, which, while convenient, also enhances the central bank's transaction monitoring capabilities. In contrast, the U.S. emphasizes the protection of constitutional rights and individual privacy rights, avoiding excessive government interference in private financial assets.

Secondly, CBDCs will strengthen 'de-intermediation' and affect the implementation of the Federal Reserve's monetary policy. Allowing central banks to serve individual consumers directly will diminish the role of commercial banks, potentially leading to deposit outflows, heightened bank competition, and even triggering a wave of bank failures, undermining the existing economic structure. A 2022 report by the Federal Reserve indicated that such a transformation could be too radical and amplify systemic risks. CBDCs primarily aim to enhance payment efficiency and financial inclusion, but the U.S. believes these benefits are insufficient to offset potential harms.

There are also concerns about power concentration and global competition. Opponents of CBDCs worry that they will enhance central banks' control over monetary policy and even foster digital hegemony internationally, where a country’s CBDC could dominate global trade and threaten national sovereignty. The U.S. opts to maintain the traditional status of the dollar through anti-CBDC measures, promoting private stablecoins (like USDC) as alternatives and encouraging market-driven innovation.

Sam:

The Federal Reserve is not affiliated with any political party, so there is no political donation operation; it will prioritize those who have paid the 'protection fee.' If the Fed gets involved, no one else will be playing. Moreover, stablecoins at least retain some decentralized attributes, such as algorithmic stablecoins and cryptocurrency-pegged stablecoins. There will still be room for development with new technologies, algorithms, or solutions in the future. In contrast, CBDCs are entirely centralized, fundamentally opposing the principles of crypto; decentralized assets are the core of these three acts. Private privacy, free finance, and resistance to censorship are all demands. Introducing CBDCs would disrupt the entire landscape.

In simple terms, the Federal Reserve issuing currency is like dropping pants to fart; these three acts will become window dressing.

Lawyer Li Zhongzhen:

The U.S. government does not have the authority to issue dollars; that power lies with the Federal Reserve. One significant reason the U.S. government promotes the Genius Act is to bypass the Federal Reserve to expand the dollar’s reach. Allowing CBDCs would greatly benefit the Federal Reserve but offer little real advantage to the U.S. government; only by restricting the Fed can the government achieve fiscal freedom.

In contrast, countries that are attempting to promote CBDCs have the authority to issue currency within their governments, so there is no conflict of interest in their issuing CBDCs.

Pang Meimei:

In China, everyone is aware of the digital yuan, and the country has been promoting it. This is actually an example of a CBDC. CBDCs have clear advantages, such as convenience and efficiency in payment settlements. Given these clear advantages, why oppose it? We need to view this issue from a broader perspective. Generally, it is difficult for individuals to interface directly with the central bank, so commercial banks play a mediating role in between. A CBDC is a blockchain online banking service system run by the central bank. If every individual can directly interface with the central bank for storage and loans, over time, commercial banks may become redundant. I believe a significant number of commercial banks may be forced to close, which would directly harm the stability of the existing economic and financial system. Furthermore, the CBDC system is not entirely decentralized. If a CBDC is issued and becomes liquid, how do we protect individual financial assets? KYC and AML must still be implemented; how is that different from the online banking we use now?

It is equivalent to merely adding blockchain technology to an already digitized banking system, without any essential improvements. The ultimate result may be that there are neither enhancements nor a resolution to numerous potential issues. Isn't that akin to failing to catch a chicken and losing the rice? Personally, I prefer to move forward steadily, avoiding blind mass implementation of CBDCs, or adopting the 'sandbox' approach practiced in Hong Kong.

Q4: Will this inspire regulatory lessons in places like the EU and Asia? How will this move by the U.S. affect the global Web3 regulatory landscape?

Luke:

The Genius Act, the Clear Act, and the Anti-CBDC Act, passed in the U.S. in 2025, may inspire the EU and Asian countries to reference its crypto regulatory model. The EU's MiCA regulations may be refined to align with U.S. standards, while Japan and Singapore may follow suit in stablecoin regulation. India may balance innovation and compliance, and China may leverage the opportunity against CBDCs to expand the influence of the digital yuan. It is also possible that, like the U.S., it will vigorously promote the use of RMB stablecoins.

The global Web3 regulatory landscape will trend towards standardization, encouraging private stablecoins and DeFi. However, the U.S.'s anti-CBDC stance may cause it to 'lag' in CBDC payment systems while simultaneously boosting the status of other private crypto asset platforms. This may trigger global regulatory competition, with capital flowing towards friendly regulatory environments, potentially increasing geopolitical friction and testing U.S. leadership in the digital economy.

Sam:

The EU may not necessarily follow suit, but some Asian countries have a demand for regulatory reference because the EU has regulated cryptocurrencies for a long time. In 2014, Germany became the first country to accept Bitcoin as currency, followed by the Netherlands, France, and others. Last year, statistics showed that there were over 2,700 crypto licenses across Europe, and Canada had more licenses and regulations than North America. However, Asia indeed needs to learn from this, as the entire region currently has the least, with Poland being the only exception. These data indicate that in terms of crypto regulation or being crypto-friendly, the U.S. can only be considered to have kept pace with the crowd, as they themselves are large and difficult to pivot.

However, regulations regarding stablecoins will reference North American legislation because compliance in this area must align with the main regulatory frameworks, as mainstream stablecoins are primarily dollar-pegged, and the dollar itself is heavily regulated. This round of operations in North America will also accelerate the implementation of regulations in various regions, primarily focusing on stablecoins, potentially leading to crypto taxation. The regulatory standards in major countries and regions will soon align, making the entire industry more standardized and transparent. The early days of hundred-fold gains are unlikely to return. Web3 is no longer a path to rapid wealth but will develop in a more sustainable manner.

Lawyer Li Zhongzhen:

In terms of stablecoin regulation, Hong Kong is ahead, but for crypto regulations excluding stablecoins, the U.S. is the fastest country globally to establish a detailed crypto regulatory framework. Other countries can refine their regulatory frameworks based on their national conditions, such as implementing tiered and categorized regulation of crypto assets and clarifying regulatory agencies and systems.

The U.S. has fired the first shot; I believe other countries will soon follow. It won't be long before the global Web3 regulatory landscape continues to improve, potentially forming mutual recognition of regulatory compliance.

Pang Meimei:

The Genius Act establishes a solid regulatory framework for stablecoins. The Clear Act clearly defines categories of digital assets, corresponding regulatory agencies, and the regulatory responsibilities of different agencies. The Anti-CBDC Act explicitly prohibits the Federal Reserve from issuing central bank digital currencies to individuals, preventing excessive financial surveillance and maintaining the role of commercial banks in the financial system.

Previously, U.S. regulation was fraught with uncertainty. On one hand, different states had varying regulatory interpretations and strictness; on the other hand, there was ongoing debate over whether cryptocurrencies should be classified as securities or commodities. Such uncertainty led many entrepreneurial entities to migrate to more regulatory-friendly regions. The implementation of these three acts could help the U.S. reclaim leadership in digital asset innovation. The regulatory framework may become a global reference template, prompting other countries to expedite the improvement of laws related to crypto assets. The digital asset ecosystem in the U.S. and globally may be on the brink of significant transformation.

Q5: The three acts are seen as a turning point for the U.S. and even the entire crypto industry, shifting from 'barbaric growth' to 'rules-driven.' How will they affect the compliance costs and operational models of Web3 startup projects?

Luke:

Clearly, these three acts will push the U.S. crypto industry from 'barbaric growth' towards rule-driven governance, significantly impacting the compliance costs and operational models of Web3 startup projects. In the short term, compliance costs will rise due to disclosure, auditing, and KYC/AML requirements, increasing startup expenses (legal costs can account for 40% of financing), potentially driving small projects out due to heavy burdens. However, in the long term, clearer regulations will reduce litigation risks and attract VC investments. Operational models will shift from ambiguity to compliance focus, emphasizing decentralized governance and RWA tokenization to achieve exemptions (e.g., ICO caps at $75 million), transitioning from rapid iteration to innovation within legal frameworks.

This may squeeze small projects in the short term, but in the long run, it will enhance industry maturity, attract global resources, and establish internationally recognized regulatory frameworks. This may influence the legal compliance frameworks for cryptocurrency markets in other regions (such as the EU's MiCA, Singapore's DTSP, etc...).

Sam:

To a certain extent, this marks the transition of Web3 entrepreneurship from 'disorderly innovation' to a 'compliance-first' new era.

Several aspects are foreseeable, such as the entrepreneurial threshold being significantly higher, prohibiting arbitrary token issuance, and licenses becoming standard. Compliance costs will also rise sharply, with budgets for lawyers, audits, KYC/AML becoming essential. The industry will accelerate the elimination of non-innovative or unprofitable small projects or gray projects. However, POW miners should be among the biggest beneficiaries, especially Bitcoin. Only compliant businesses can scale up, and only compliant businesses can sustain in the long run while avoiding the situation where bad money drives out good.

However, for the 'Crypto Native' original community, Web3 is Web3, business is business, crypto is crypto, and technology is technology. Native crypto is permissionless; true crypto will find its place to thrive.

Lawyer Li Zhongzhen:

With the implementation of the Genius Act, Clear Act, and Anti-CBDC Act, project teams need to determine their compliance pathways based on their project types:

Issuers of stablecoins must invest significant funds to obtain the corresponding licenses and establish independent auditing systems and bankruptcy isolation mechanisms, especially regarding the requirement for reserve assets, as a 1:1 reserve ratio imposes high financial demands on project teams.

For non-stablecoin projects, project teams need to clearly understand whether they are dealing with securities or commodities. In the past, when there was no regulation, project teams might only need a technology development team, a security protection team, and a marketing team to tell their narrative, raise funds, and go on-chain. But that is no longer acceptable. Therefore, at the project's inception, teams must establish a professional compliance team to address SEC or CFTC regulations, with compliance costs potentially exceeding research and development costs, making it difficult for less-capable small projects to incubate.

Pang Meimei:

Indeed, these three acts collectively establish clear 'game rules' for the crypto industry. The lack of clear rules in recent years has led legitimate entrepreneurs to face unpredictable regulations, while speculators exploited the legal ambiguities for profit. These three acts will reverse this situation.

The legislation requires detailed compliance from stablecoin issuers, trading platforms, and DeFi projects, listing many prohibited behaviors. Asset reserve requirements and funds separation systems increase capital and management costs, financial information disclosure and audits raise operational costs. For those digital assets that were previously in a gray area, determining regulatory attributes requires even more resources, thereby increasing compliance costs. Additionally, countries or institutions planning to issue central bank digital currencies may need to readjust their strategies and plans, further increasing compliance costs and uncertainties. The rise in compliance costs may lead to some small projects being unable to bear the costs and exiting the market, but it also provides clear pathways for high-quality projects to formulate long-term operational models in accordance with legal provisions, ensuring stable and enduring operations.

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