In a move that has since been dominating crypto news, the GENIUS Act passed, essentially enacting the country’s first major cryptocurrency legislation. It also sets up a prominent regulatory framework for handling payment stablecoins.
After a highly-contested vote, one that led to a standstill and the longest vote on chamber record, the House decided to move forward with consideration of the bills, unfreezing the floors and allowing the votes to proceed.
Trump to Sign the GENIUS Act
All of this leads to President Trump signing the act into law. After passing in the House, it was sent to the President’s desk for his signature. The goal of this legislation is to ultimately make the United States the leader in digital assets while protecting consumers in the digital marketplace.
There are a few critical takeaways from the passing of this legislation. Let’s take a closer look as President Trump signs the bill into law.
Crypto Industry ‘Seal of Approval’
One of the hindering aspects of investing in crypto has been the uncertainty surrounding the marketplace. Not only were there challenges that threatened market prices, but security and trust issues on the part of consumers.
The signing of this act is seen as a major milestone for the industry. It is seen as the first step of the U.S. government in regard to making regulatory headway. This is the first major digital assets bill to ultimately clear Congress and be signed off on by the president. It provides the industry, as a whole, with a legitimacy that had not previously existed.
“It’s a big deal because when you have a law…it essentially gives a Good Housekeeping seal of approval to the industry,” said Ian Katz, managing partner at Capital Alpha. “You now have Congress and the president of the United States signing off on the legitimacy of this industry.”
“You can interpret the legislation as encouraging activity,” Katz continued. “To a lot of people, this is the sort of thing you need to really get an industry to take off.” Given the massive trading price of top cryptocurrencies, this could lead to a bullish upswing in the market as a whole.
The bill’s passing is also a marked reversal of the industry’s fortunes in the nation’s capital. As a whole, the industry had been struggling to regain its footing in the wake of the massive collapse of crypto exchange FTX, plus the charges of fraud filed against Sam Bankman-Fried (he was later found guilty and sentenced to 25 years in prison).
Under former president Joe Biden, the industry had to contend with Gary Gensler, Securities and Exchange Commission (SEC) Chair. Under his regime, Gensler brought several enforcement actions against a number of crypto firms. Gensler was accused of attempting to regulate via enforcement, rather than providing clear rules from the start.
Under Trump, however, it appears as though the Trump administration has embraced the market. With David Sacks as crypto czar, crypto leaders have been invited to the White House as an executive order was signed to create a digital asset stockpile and official Bitcoin reserve.
Broader Crypto Framework to Come?
This is a major industry win, but it is just the start of a larger regulatory puzzle when it comes to digital assets. Stabelcoins are but one part of the entire cryptocurrency puzzle. They are tied to another asset – typically the U.S. dollar – in order to hold a stable price.
As of now, Congress has yet to pass any type of legislation that would create broader crypto framework. Right now, the biggest issue at hand is how to divide oversight between the SEC as well as the Commodity Futures Trading Commission.
The House did pass a version of structured legislation called the Digital Asset Market Clarity Act. The Senate, however, is set to release its own discussion draft but tends to move quite a bit more slowly. The White House has aims to pass a second key crypto bill sometime near the end of September.
New Responsibilities for Financial Regulators
Another important aspect of the GENIUS Act is that a number of financial regulators are now set to take on new responsibilities when it comes to the regulation of stablecoins. The Office of the Comptroller of the Currency (OCC) will be charged with regulating stand-alone stablecoin issuers. It will also work with the Federal Deposit Insurance Corporation, National Credit Union Administration, and the Federal Reserve to regulate institutions that already oversee stablecoin issuers.
Issuers can potentially expedite the process of approval if they become chartered banks with the OCC. Several prominent stablecoin issuers, like Ripple and Cricle, have already applied for bank licenses.
Banking Industry Pushing Bank on Crypto Charters
The banking industry isn’t fully on board with the direction things are moving and has its own set of concerns. The most notable pushback has to do with stablecoin issuers seeking bank charters.
Banking institutions sent a letter to the OCC, questioning whether stablecoin issuers would essentially be doing the job of national trust banks. The letter also called for the OCC to hold off on receiving applications for the time being.
Traditional Institutions Weighing Stablecoin Adoption
Despite concerns from some, a good number of traditional institutions within the financial services space are already moving in the direction of stablecoins. Brian Moynihan, Bank of America CEO, said that the bank is working on launching a stablecoin. Citigroup CEO Jane Fraser noted that the bank was looking into the move as well.
Just last month, JPMorgan Chase announced that it was launching a deposit token similar to a stablecoin called JPMD. CEO Jamie Dimon said that the company expects to be involved in stablecoins as well.
A Major Move for the Cryptocurrency Industry
Cryptocurrency already has a major foothold in the United States, but there has always been uncertainty. Investors, be they individuals or institutions, have traditionally held off because of regulatory concerns. This is the first step in creating the kind of framework that can provide clarity and security.
The GENIUS Act provides oversight and clarity in terms of regulatory framework. In addition to defining what can be called a stablecoin, the act creates a legal category for those stablecoins. With registration requirements, not to mention compliance and oversight requirements, it feels like crypto is finally getting the treatment that traditional investments do.
The act also provides consumer protection at a new level. Stablecoin issuers will be required to have 100% reserve backing with liquid assets, plus monthly public disclosures of reserve competition. With additional provisions for consumer protection, there is more certainty than ever before.
Finally, this plays a role in stablecoin adoption. The act is meant to boost overall confidence in stablecoins, leading to a potential increase in both retail and institutional investors. Through increased security measures and transparency, it could encourage financial institutions and businesses to begin integrating stablecoins into their operations. The road ahead is slow, but this act could serve as the groundwork.
