The approval of stablecoin regulations will standardize cryptocurrency as a financial instrument, paving the way for the world's largest institutions to issue stablecoins and use them for payments.

Written by: Matt Hougan, Chief Investment Officer of Bitwise

Translated by: AIMan@Golden Finance

Politicians in Washington did the right thing.

I haven't had the chance to write this for a while, but today I finally have the opportunity to do so.

On Monday, the U.S. Senate passed the end of debate on the GENIUS Act with a vote of 66 in favor and 32 against, with 16 Democratic senators crossing party lines to vote in favor. The bill provides a solid regulatory framework for stablecoins in the United States.

I don't want to count my chickens before they hatch, but it looks like we will pass the first mature cryptocurrency legislation in the U.S. this summer.

This is a big deal.

Aside from the approval of the Bitcoin spot ETF in January 2024, this is the most significant regulatory advancement in the history of cryptocurrency, and it may even be more important than that.

I believe this lays the groundwork for the long-term sustained rise of crypto assets beyond Bitcoin. The biggest beneficiaries will be Ethereum (ETH), Solana (SOL), and various decentralized finance (DeFi) assets such as Uniswap (UNI) and Aave (AAVE).

Before I explain why, let's briefly discuss what this is all about.

What is the GENIUS Act?

Stablecoins are one of the killer applications of cryptocurrency. They are digital representations of the U.S. dollar that can circulate on blockchains like Ethereum. Bank wire transfers take 24 hours, while stablecoins can settle in just a few seconds—just like a text message or an email.

Stablecoins barely existed in 2019; today their global market cap exceeds $200 billion.

Stablecoin market cap, source: Bitwise Asset Management, data from The Block, Coin Metrics, and CoinGecko. Data range from Q1 2020 to Q1 2025.

Note: "Others" includes BUSD, crvUSD, DAI, FDUSD, FEI, FRAX, GHO, GUSD, HUSD, LUSD, MIM, PYUSD, TUSD, USDD, USDP, and USDS.

But stablecoins have long been in a regulatory gray area. Stablecoin issuers like Circle must comply with numerous regulations, but there is currently no overarching federal framework. The GENIUS Act provides that framework.

The bill guarantees that:

• Stablecoins will be backed 1:1 by U.S. Treasury securities and dollar equivalents;
• Large stablecoin issuers will register with federal banking regulators;
• These issuers will undergo regular audits to ensure their robustness; and
• Stablecoin issuers will implement anti-money laundering restrictions on their tokens.

In other words, the bill gives the federal government support for stablecoins, allowing large banks to issue stablecoins and enabling merchants to accept them.

I am surprised that the asset size of stablecoins has grown to over $200 billion without the involvement of the world's largest financial institutions, and consumers cannot easily distinguish between "good stablecoins" like USDC and "bad stablecoins" like TerraUSD.

With these protections in place, I expect this market to soon reach $2.5 trillion. Close your eyes and imagine a world where JPMorgan and Bank of America issue stablecoins; if you shop with stablecoins instead of a Visa card, Amazon gives you a 2% discount; accepting stablecoins is as common as accepting Venmo or PayPal.

This is the world we are about to live in.

Just the Beginning

While I am excited about stablecoins themselves, I believe this is just the beginning. Once we achieve the normal transfer of dollars on blockchain networks—and the largest financial institutions in the world are involved—then transferring stocks, bonds, and other financial assets on the same track will be just a small step.

This is the fundamental argument for investing in non-Bitcoin crypto assets like Ethereum and Solana: over $100 trillion in financial assets will eventually be transferred to the blockchain. The passage of this bill will further exacerbate this trend.

I suspect the impact here will be similar to that of the Bitcoin ETF.

The approval of the spot Bitcoin ETF has standardized cryptocurrency as an investment vehicle, and now some of the largest institutions globally are issuing Bitcoin ETFs and incorporating them into their portfolios. I believe the approval of stablecoin regulations will standardize cryptocurrency as a financial tool, paving the way for the world's largest institutions to issue stablecoins and use them for payments.

What a genius move.

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