The “GENIUS Act,” officially known as the Guilding and Establishing National Innovation in U.S. Stablecoins Act, represents a significant shift in the financial landscape. This legislation allows private entities, including banks, hedge funds, and technology firms, to issue payment US dollar stablecoins. This opens up a new frontier for financial transactions and investment opportunities.

What Are Payment US Dollar Stablecoins?

Payment US dollar stablecoins are cryptocurrencies designed to maintain a 1:1 value with the U.S. dollar. They are intended to facilitate seamless transactions with the stability of a traditional fiat currency.

Who is Eligible to Issue US Dollar Stablecoins?

Qualified issuers include subsidiaries of banks and nonbank companies that receive approval from the Office of the Comptroller of the Currency (OCC). A critical requirement for approval is maintaining a reserve that covers 100% of the stablecoin issuance. This reserve can consist of actual U.S. dollars or short-term Treasury bills with a maturity of less than 90 days.

Existing USD Stablecoins

The market already features several USD stablecoins. Tether’s USDT and Circle’s USDC are the two largest, with a combined market value of approximately $250 billion. The daily transaction volume of USD stablecoins exceeds $20 billion, primarily within the cryptocurrency ecosystem.

Intended Purposes of the Legislation

The GENIUS Act aims to:

• Clarify the regulation of stablecoins to foster their development and adoption.
• Increase demand for U.S. Treasury bills.
• Reinforce the U.S. dollar’s position as the dominant global currency.

Key Implications of the Bill for investors and economy

One of the most significant implications of the GENIUS Act is the democratization of money issuance. Instead of being solely controlled by the Federal Reserve, private companies will also have the ability to issue money. If the Act is enacted, a substantial expansion of the money supply is expected. Some cryptocurrency experts project the total value of US dollar stablecoins to reach $2.8 trillion by 2028, representing an addition of nearly $2.5 trillion in dollar equivalents.

This influx of new money is likely to drive up the prices of crypto assets and other financial assets, such as stocks and bonds. It could also have a broader impact on the real economy, potentially leading to increased inflation in goods and services.

Furthermore, the Act signifies a deeper integration of the U.S. dollar with the cryptocurrency market. This linkage suggests that the U.S. dollar will be closely tied to the performance of the cryptocurrency world, akin to its historical ties to gold and oil.

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