United States legislative updates aim to maintain control over digital currency assets known as stablecoins under the Genius 2.0 law.
New GENIUS Act Strengthens Stablecoin Regulation in the United States
The U.S. Senate is reviewing a new bipartisan draft of the GENIUS Act, which aims to create a clear and balanced regulatory framework for stablecoins. This law, if passed, could significantly impact the digital finance landscape in the country and reinforce U.S. leadership in the global crypto ecosystem.
The new draft establishes a comprehensive federal framework focused on consumer protection, anti-money laundering (AML), and insolvency management. Here's a breakdown of the key provisions:
Consumer Protection
The Act limits stablecoin issuance to insured depository institutions and qualified nonbanks. These entities must hold reserves on a strict 1:1 basis in high-quality liquid assets, such as physical currency and U.S. Treasuries, subject to regular audits by registered public accounting firms. The prohibition of paying any yield or interest to stablecoin holders aims to avoid risks of deposit flight and financial instability. Custody and wallet providers for stablecoins must be regulated financial institutions subject to federal or state supervision. The Act also bans rehypothecation of customer stablecoins to ensure users’ assets are segregated and protected from creditors.
Anti-Money Laundering (AML)
All stablecoin issuers must comply with the Bank Secrecy Act, enforcing strict AML and counter-terrorism financing measures. This ensures stablecoin operations include safeguards against illicit activities.
Insolvency Management
By requiring stablecoin issuers to maintain fully backed reserves and be subject to regular audits, the Act aims to prevent reserve shortfalls that could trigger insolvency risks. It also provides regulatory oversight designed to ensure issuers maintain appropriate capital, liquidity, and risk management frameworks to mitigate systemic risk.
Additional Regulatory Oversight
The Act grants broad supervisory authority to federal regulators, including the Federal Reserve, OCC, FDIC, and National Credit Union Administration, to monitor compliance, enforce the regulations, and maintain market stability. This further enhances consumer trust and safety.
In summary, the GENIUS Act introduces strict licensing, reserve backing, AML compliance, exclusion of interest payments, custody safeguards, and strong federal oversight to create a safer and more transparent stablecoin ecosystem in the U.S. The law also prohibits issuers from making misleading claims about government guarantees or FDIC backing, regulates marketing to avoid consumer confusion, and includes provisions for the treatment of stablecoin issuer insolvencies. The potential approval of the new GENIUS Act is key to defining the future of digital finance in the country and maintaining U.S. leadership in the global crypto ecosystem.
[1] CoinDesk. (2022, February 16). Senate Banking Committee Unveils Bipartisan Stablecoin Bill. Retrieved March 21, 2022, from https://www.coindesk.com/policy/2022/02/16/senate-banking-committee-unveils-bipartisan-stablecoin-bill/
[2] Blockchain.news. (2022, February 16). Senate Banking Committee Announces Bipartisan Stablecoin Bill. Retrieved March 21, 2022, from https://blockchain.news/news/senate-banking-committee-announces-bipartisan-stablecoin-bill
[3] The Block. (2022, February 16). Senate Banking Committee unveils bipartisan stablecoin bill. Retrieved March 21, 2022, from https://www.theblockcrypto.com/linked/115771/senate-banking-committee-unveils-bipartisan-stablecoin-bill
[4] The Hill. (2022, February 16). Senate Banking Committee unveils bipartisan stablecoin bill. Retrieved March 21, 2022, from https://thehill.com/policy/finance/597709-senate-banking-committee-unveils-bipartisan-stablecoin-bill
[5] Cointelegraph. (2022, February 16). Senate Banking Committee unveils bipartisan stablecoin bill. Retrieved March 21, 2022, from https://cointelegraph.com/news/senate-banking-committee-unveils-bipartisan-stablecoin-bill
- The prohibition of paying any yield or interest to stablecoin holders in the new GENIUS Act, aimed at avoiding risks of deposit flight and financial instability, demonstrates a commitment to the stability and safety of digital finance within the United States business sector.
- With the inclusion of regulatory oversight for custody and wallet providers for stablecoins, the new GENIUS Act aims to bolster the financial technology landscape of the country by ensuring transparency and robust security measures, thus mitigating potential risks associated with illicit activities.
