The United States Senate approved the Genius Act bill on June 17, 2024, thus paving the way for strict regulation of stablecoins.
This type of cryptocurrency, unlike bitcoin and ether, is designed to maintain a stable value thanks to the direct peg to traditional currencies like the US dollar, thus reducing the typical volatility of other cryptocurrencies.
According to Scott Bessent, U.S. Treasury Secretary, the stablecoin market could expand to reach 3.7 trillion dollars by the end of the decade.
Currently, the total volume stands at 260 billion dollars, with two main players such as Tether’s USDT and Circle’s USDC, which together account for over 215 billion dollars.
The Genius Act argues that the stablecoin sector can stimulate the demand for American government securities, as these digital assets must be backed by dollar reserves.
This mechanism, Bessent explained, could prove strategic for reducing the cost of public debt and helping to manage national spending.
Consequently, Trump’s explicit goal is to strengthen the global role of the dollar through the massive adoption of domestic stablecoins.
To protect investors, the legislation establishes the obligation that stablecoins be fully backed by US dollars.
Additionally, annual audits are required for entities managing stablecoins with a capitalization exceeding 50 billion dollars.
This rigorous oversight aims to ensure transparency and trust in the emerging market of these financial assets.
Another key provision of the Genius Act concerns the limitation of participation by large publicly traded tech companies, such as Amazon and Meta, which will not be able to launch stablecoins independently without the collaboration of financial institutions or if they do not meet stringent requirements regarding data transparency and security.
This rule aims to prevent monopolies and conflicts of interest in the stable cryptocurrency ecosystem.
Recently, the news emerged that Amazon is considering the use of stablecoin to facilitate payments on its platform.
While on one hand this prospect is intriguing for the developments in digital commerce, on the other hand, the Genius Act imposes strict regulation, ensuring that such initiatives comply with the criteria imposed by the American Government to avoid systemic risks.
Despite the applause from the crypto industry, some senators have expressed strong reservations about the Genius Act.
In particular, Democratic Senator Elizabeth Warren has described this regulation as “light regulation”, comparing it to the deregulation of the years leading up to the 2008 financial crisis.
Warren highlighted how the text offers the industry more formal than effective government oversight, without real incisive control mechanisms.
The senator also highlighted a possible conflict of interest related to Donald Trump, who, according to official documents published by the White House, would have collected over 57 million dollars from the sale of cryptocurrencies through his platform World Liberty Financial.
The latter has launched its own stablecoin pegged to the dollar, making the current president’s role in defining a regulatory framework for the sector controversial.
It should be noted that the Genius Act prohibits members of Congress and their family members from issuing their own cryptocurrencies, a measure aimed at preventing further conflicts of interest.
However, this prohibition does not extend to other figures involved in the public sphere, fueling further debates on the appropriateness and overall effectiveness of the regulation.
Ultimately, the Genius Act marks a historic milestone in the definition of rules for stablecoins in the United States.
The law represents a first attempt to balance technological innovation and financial protection, recognizing stablecoins as having a growing role in the digital economy.
However, the judgment of experts remains partly critical, especially due to the perception of a regulatory approach that is still partial and potentially risky.
With the current market expansion, the adoption and compliance with the Genius Act could become key drivers for the sustainable growth of stablecoins and, more generally, for the spread of digital assets backed by the US dollar.
For those operating in the financial and technological sector, following the evolution of this law will be crucial. Carefully monitoring its application and any legislative developments will offer a clear strategic view of the future of stablecoins in the United States and worldwide.
