The Senate has recently advanced the Guiding Uniform and Innovative Stablecoins Payments Act (GENIUS Act), signaling a significant step towards regulating the rapidly growing $238 billion stablecoin market. This important bipartisan bill is intended to provide a bright-line regulatory framework for the entities that will be issuing these digital currencies. That said, it is meeting bipartisan criticism which casts serious doubt on its prospects for passage.
Sen. Bill Hagerty (R-Tenn.) introduced the GENIUS Act, emphasizing the need for a regulatory framework to foster innovation within the United States.
"Without a regulatory framework, stablecoin innovation will proliferate overseas — not in America!" - Sen. Bill Hagerty (R-Tenn.)
The GENIUS Act would offer a framework to banks, firms, and other institutions to create and distribute digital assets. This would further strengthen stablecoins’ mainstream adoption by enhancing confidence in the asset and fostering increased competition within the market.
That’s why we were excited to see the bill pass a 68-30 procedural vote in the Senate—with plenty of bipartisan support, but not quite unanimous support. Even with this progress, the bill still has a long way to go.
"Congress has also realized that instead of threatening the U.S. dollar, stablecoins can help cement its global dominance, because [99% of stablecoins are pegged to USD]." - Senate Majority Leader John Thune (R-S.D.)
Critics, like Sen. Jeff Merkley (D-Ore), argue that the GENIUS Act compromises the decentralized nature of cryptocurrency and lacks sufficient safeguards against corruption.
"We need guardrails that ensure that government officials aren't openly asking people to buy their coins in order to increase their personal profit or their family's profit." - Sen. Jeff Merkley (D-Ore)
"Where are those guardrails in this bill? They're completely, totally absent." - Sen. Jeff Merkley (D-Ore)
The ripple effects of the GENIUS Act would go beyond the cryptocurrency market, creating a major disadvantage for retailers and payment systems. Nic Puckrin emphasizes the innovative and expansive life stablecoins can have. He adds that their general acceptance as a digital alternative to the U.S. dollar continues to grow.
"The use cases are very broad, and new ones are emerging all the time." - Nic Puckrin
"Stablecoins are also being used increasingly in emerging markets, like Latin America and Sub-Saharan Africa, to hedge against monetary instability, as well as for cheap cross-border payments." - Nic Puckrin
The House passed the GENIUS Act following vigorous debate and efforts to tack on several other amendments. Among these were proposals closely tied to the Credit Card Competition Act, highlighting the mixed political and economic interests at play in this process.
The GENIUS Act in its current form has the potential to help make stablecoins more commonplace. It can increase confidence in the currency and stimulate more competition in the marketplace.
"As long as issuers are clearly following the rules and regulations, more competition in the stablecoin landscape is both welcome and necessary." - Nic Puckrin
"Right now, [the stablecoin market] is, for all intents and purposes, a duopoly. The market is nearly entirely dominated by Circle's USDC and Tether's USDT." - Nic Puckrin
Given the regulatory certainty the GENIUS Act would provide, we could see a flurry of new competitors in the stablecoin space.
"We'll likely see a flood of them rush into the market at the start." - Nic Puckrin
"We'll likely see stablecoins increasingly adopted as a digital alternative to the U.S. dollar, so banks, fintechs and merchants will be forced to offer stablecoin payment options." - Nic Puckrin
