Why Passing the Stablecoin GENIUS Act Might Not Be So Smart
Last week, as much of the world focused on Iran and Israel, the crypto hall celebrated a huge victory in Washington. “The story is underway,” wrote Jeremy Allaire, the founder and chief executive officer of Circle, a stablecoin platform, shortly after the Senate voted through the GENIUS Act, a bill designed to facilitate the growth of digital currency, and to give it, and other cryptographic assets, the cachet of legitimacy.
The stablecoins, which are designed to maintain a constant value of a dollar, which makes them much less volatile than regular cryptocurrencies such as bitcoin and ethereum, currently exist in a regulatory gray area, in which regulators have dealt with some, but not all, such as securities subject to securities. Although companies such as Tether and Circle have created stablescoins which now have a market capitalization combined with more than two hundred and fifty billion dollars worldwide, large banks and other traditional financial institutions have remained away, pushed by regulatory uncertainty and crypto association with illicit transactions. THE GENIUS ACT (which means guide and establish national innovation for the United States Stablecoins Act) may well change all of this and bring the crypto to the consumer financial system. It treats stablecoins as a means of payment rather than titles, and it creates a set of rules to follow for their issuer, under the surveillance of state and federal regulators.
The bill was adopted with the support of fifty Republicans and eighteen democrats. Allaire said that the final adoption of the law, which has yet to go through the House of Representatives, “will stimulate American economic and national competitiveness for the decades to come”. Republican senator Bill Hagerty, from Tennessee, who sponsored the bill, has made similar allegations. But for many public interest groups and the Democrats of the Senate which voted against legislation, its progress through the Senate has mainly illustrated the power of the crypto lobby, which now exerts enormous influence at the two extremities of Pennsylvania Avenue. “THE GENIUS ACT is an important step, but this is only one of the many actions that the cryptographic industry and its allies in the White House and Capitol Hill take to launch an uncontrolled experience in the outburst of crypto on the economy and the financial system, “said Mark Hays, an associate director of the crypto and the fintech of the Americans for Financial Reform, a group of plaid based on Washington.
During the Biden administration, a certain number of crypto exchanges failed and the creator of one of them, Sam Bankman Frit, was found guilty of eight charges of fraud and conspiracy. (He had illegally transferred customer deposits to his coverage fund.) To the Securities and Exchange Commission, Gary Gensler, president of Biden, said at the time that the cryptographic industry was “plagued by fraud and manipulation”, and his agency continued some of his most prominent companies, including quoin coins. Last year, a PEW Research Center survey revealed that more than sixty percent of Americans had little or no confidence in crypto security as an investment.
But, also in 2024, three super PacFunded by the cryptographic industry spent about two hundred and sixty-five million dollars to elect Pro-Crypto candidates and defeat Crypto skeptics, such as Sherrod Brown, the Senior Democratic Senator of Ohio. With last week’s vote, the crypto lobby “recovered part of its enormous investment,” said Bartlett Naylor, a financial policy analyst at the consumer group-Advocacy Citizen. “Financial contributions from the crypto sector have converted certain politicians elected to the pro-Crypto position, and that has frightened the Bejeezus by many others,” he added.
Defenders of GENIUS ACT says that it will protect stable holders by demanding that their issuers adhere to a set of codified rules, which include the maintenance of the money of the holders in complete safety, such as cash bills and bank accounts; publish the composition of these reservations on a monthly basis; And, in the case of issuers with a market capitalization of more than fifty billion dollars, publishing verified financial statements each year. The bill also stipulates that stablecoin issuers must observe certain money laundering laws, and that, if they go bankrupt, their stablecoins will first claim their assets. “The engineering bill will guarantee that Stablecoin reserves will be safe and boring, and that consumers will have a direct legal complaint on underlying assets,” said Christian Catalini, researcher at the Sloan School of Management, who created the cryptocurrenomic laboratory of the University, in an email.
Critics of the bill say that his protections are not far enough. “This is a collection of half-measures that will create a regulatory printur for stabbed without withdrawing the dangers associated with them,” said Hays. “We see in this bill an inability to learn regulatory errors from the past.” He compared it to the Comedity Futures Modernization Act of 2000, which has ostensibly set up a new regulatory framework for derivatives but really weakened surveillance in the key fields – a failure which became patented during the global financial crisis of 2007-09. “We have already seen this show,” added Hays.
Senate legislation contains a provision of conflicts of interest which “would prohibit any member of the Congress or to a senior manager of the executive management to issue a payment payment product during their stay in the public service”. However, legal experts claim that this restriction, like other ethical laws, would not apply to the president or vice-president, an exemption which is far from trivial. In March, World Liberty Financial, a crypto startup that belongs to the majority by the Trump family, announced that it was a new Stablecoin, USD1. Since the Trump family is now a Stable -Coin player, he is potentially benefiting from a great expansion of their use. (USD1’s market capitalization already amounts to around $ 2.2 billion.) “If this bill adopts the complete congress, it is certainly possible that Trump’s stable can become one of the dominant parties of the cryptographic ecosystem, which would be extremely rewarding,” said Hays.
The Trump family efforts to get rich by making a play of “$ Trump” memes have already received a lot of attention. (Earlier this month, the Forbes Journalist Dan Alexander estimated that Trump’s transport of memes could be worth more than three hundred million dollars.) Critics say that the existence of a stablecoin belonging to Trump creates new possibilities for interested parties to align money to him and his businesses. At the beginning of last month, one of the co-founders of World Liberty Financial declared that its new stablecoin would be used in an investment of two billion dollars that an entity linked to the government of the United Arab Emirates made in Binance, the best world exchange of cryptography. The founder of the company, the Chinese billionaire Changpeng Zhao, was sentenced in the United States to four months in prison last April, after pleading guilty to money laundering, and he would now have asked for presidential forgiveness. At the end of May of this year, the SEC announced that it rejected civil action against Binance.
