The U.S. GENIUS Act is highly controversial regarding banking regulation and stablecoins.

The focal point of the debate is the expanded authority for some uninsured state banks to operate nationwide, along with concerns about the impact of stablecoins on traditional bank liquidity.

MAIN CONTENT

  • Section 16(d) of the bill allows uninsured state banks to operate nationwide under OCC supervision, bypassing state approval.

  • Banking groups, state regulators, and consumer protection organizations are calling for the removal of this provision due to concerns about disrupting oversight and the safety of the financial system.

  • Concerns about regulatory loopholes regarding stablecoin could lead to bank savings being withdrawn up to $6.6 trillion, while exchange leaders question the authenticity of this data.

What is the GENIUS Act and what is the purpose of Section 16(d) in the bill?

The U.S. GENIUS Act aims to update the legal framework for the banking and cryptocurrency industries, with the purpose of Section 16(d) being to expand the operational rights for uninsured state banks under OCC supervision instead of state regulators.

This provision allows some banks to avoid state approval when operating nationwide, which policymakers argue facilitates and promotes financial innovation. However, this also poses risks of diminishing the oversight role of state authorities and potentially poses greater systemic financial risks.

Why do banking groups, state regulators, and consumer protection organizations oppose Section 16(d)?

Stakeholders have reacted strongly to Section 16(d) because they are concerned it will weaken the oversight role held by the states, thereby posing risks to the security of the financial system. They have sent letters to the Senate Banking Committee requesting the removal of this provision from the bill.

According to these groups, the operation of uninsured state banks under the OCC's authority without state permission would disrupt the balance of control and increase the potential for financial risk, especially in the context of a complex developing cryptocurrency market.

How do stablecoin regulations in the GENIUS Act raise concerns about bank cash flow?

The bill imposes limits on interest payments for stablecoins; however, banking groups warn of legal loopholes that could cause bank deposits to be withdrawn up to $6.6 trillion, a figure considered extremely large.

In contrast, cryptocurrency exchange leaders have expressed doubts about the authenticity of this data, suggesting that the growth of stablecoin does not correspond with withdrawals from community banks. This issue remains controversial and requires further analysis of the practical consequences after the law is enacted.

The bill is currently highly controversial, particularly regarding the expansion of uninsured state bank control that could affect national financial security.

(U.S. Federal Reserve, 2023)

What are the potential impacts if Section 16(d) is passed?

The expansion of national banking rights for uninsured state banks could increase power concentration within the OCC, reducing the control role of state governments. This could lead to risks of poorly managing local and regional risks.

Moreover, without strict oversight, the cash flow from stablecoin-related assets could move quickly, putting pressure on traditional bank liquidity. This issue needs careful consideration to avoid financial system breakdowns, especially in the context of the continuously volatile cryptocurrency market.

Frequently Asked Questions

Does the GENIUS Act affect cryptocurrency mining operations?

The bill focuses on banking operations and stablecoins, not directly targeting cryptocurrency mining.

Which banks are allowed to operate nationwide under Section 16(d)?

Allows some uninsured state banks to operate nationwide under OCC supervision.

Why are there concerns about funds withdrawing from banks due to stablecoin?

Loopholes in the regulation of interest payments for stablecoins may cause users to transfer funds out of traditional banks into stablecoins.

What has been the response from regulators to the bill?

Many banking groups and state regulators oppose Section 16(d) and have submitted petitions to the U.S. Senate Banking Committee.

What do cryptocurrency exchange leaders say about cash flow concerns?

Source: https://tintucbitcoin.com/stablecoin-lai-suat-va-genius-act-gay-tranh-cai/

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