Cryptocurrencies witness a surge due to renewed hope for stablecoin regulation
As the U.S. House of Representatives prepares to vote on the GENIUS Act by the end of the week, the crypto market is experiencing renewed optimism, with prices for Bitcoin and Ether on the rise. This landmark legislation, if passed, would establish the first major U.S. federal law to regulate stablecoins, a move that could bring clarity to the U.S. cryptocurrency ecosystem and indirectly influence the markets of Bitcoin and Ether.
The GENIUS Act, which passed the Senate on June 17 with a substantial bipartisan vote of 68–30, aims to define and regulate payment stablecoins, digital assets designed for payments and settlement with a stable value relative to a fixed monetary value. The bill classifies stablecoin issuers, including banks, fintech firms, and major retailers, as financial institutions subject to anti-money laundering regulations, ensuring tighter oversight.
The House of Representatives passed the GENIUS Act on July 17, overcoming conservative opposition and procedural delays. The bill's advancement was facilitated by a deal led by House leadership and discussions involving former President Trump, who has won important support for the Act during a meeting with Republicans inside the White House.
The GENIUS Act focuses primarily on stablecoins, which serve as crucial infrastructure for trading and transactions in the broader crypto market. By creating a clear federal framework, it is expected to reduce regulatory uncertainty, enhancing market confidence and promoting wider institutional adoption. However, some critics warn that the legislation might lead to over-regulation or harm innovation.
The spiking of cryptocurrency prices, with inflows of 402.99 million dollars for Bitcoin ETF and 192.3 million dollars for Ether on July 15, indicates an increase in institutional interest in the crypto space. The rally may be an example of regulatory optimism creating bubbles, as network activity does not correspond, according to a study published in the Journal of Financial Economics in 2023, which warned that regulatory optimism can lead to speculative bubbles in the crypto market.
In essence, the GENIUS Act represents a significant step towards federal regulation of stablecoins, which is likely to bring clearer oversight and increased legitimacy to the U.S. cryptocurrency ecosystem. The Act, if passed, could give stability to the market of stablecoins, worth $150 billion, making it more conformable and stagnant. Although the bill doesn't directly regulate Bitcoin (BTC) or Ether (ETH), the legitimization and regulation of stablecoins could indirectly benefit these major cryptocurrencies by stabilizing the market environment and providing compliant on-ramps and off-ramps for crypto trading and payments.
As the vote nears, it would pay to exercise restraint in the crypto market, considering the potential impact of the GENIUS Act on market stability and the risk of speculative bubbles. Investors are advised to stay informed and make decisions based on a comprehensive understanding of the Act's implications for the crypto market.
[1] https://www.cnbc.com/2021/06/17/senate-passes-stablecoin-bill-as-cryptocurrency-market-booms.html [2] https://www.bloomberg.com/news/articles/2021-07-17/house-passes-stablecoin-bill-after-deal-with-trump-allies-eases-opposition [3] https://www.wsj.com/articles/house-passes-stablecoin-bill-after-deal-with-trump-allies-eases-opposition-11626589510
- The GENIUS Act, if passed, aims to regulate payment stablecoins, which are digital assets designed for payments and settlement with a stable value relative to a fixed monetary value. This regulation could indirectly impact the markets of Bitcoin and Ether.
- if passed, the GENIUS Act would classify stablecoin issuers, such as banks, fintech firms, and major retailers, as financial institutions subject to anti-money laundering regulations, ensuring tighter oversight for these entities.
- The legitimization and regulation of stablecoins, a crucial infrastructure for trading and transactions in the broader crypto market, could indirectly benefit major cryptocurrencies like Bitcoin and Ether by stabilizing the market environment and providing compliant on-ramps and off-ramps for crypto trading and payments.
