The GENIUS Act

The bill signed into law Friday, and the one that could usher in the most significant changes, is the GENIUS Act. It paves the way for private firms to issue what are known as stablecoins, which are privately issued digital money — think Toys R’US’ “Geoffreybucks” for the 21st century. (The “stable” part of stablecoin comes from the idea that the tokens’ value would always be equivalent to $1.)

While some firms have already been issuing stablecoins, they’d been operating in a legal gray zone. The GENIUS Act lays out specific requirements for companies who issue stablecoins, like complying with anti-money laundering laws and monitoring and reporting suspicious activity. In the eyes of many consumer protection advocates, the requirements are grossly inadequate.

“The reason you would never recommend grandmother use a stablecoin is she would have to give away a dollar that’s protected by the federal government and deposit insurance, and which comes with a ton of consumer protections, and which pays interest in her banking account, in exchange for a stablecoin that doesn’t have any of those things,” said Corey Frayer, director of Investor Protection for the Consumer Federation of America.

Most entities now considering tapping into stablecoins amid the GENIUS Act’s passage say they would first use them for largely “back-end” purposes, like reducing fees paid by merchants to credit card companies or more easily converting currencies from cross-border payments.

Mainstream financial institutions are interested. The Wall Street Journal has reported several large U.S. banks, along with the payments platform Zelle, are in talks about issuing a joint stablecoin. While Zelle is free for its users, the cost of running it shows up elsewhere in the form of other fees charged by banks.