Source: Cointelegraph
Original: “Winning with Stability? The GENIUS Act Sets a New Stage for the Dollar in the Digital Age”

The GENIUS Act focuses on the issuance and circulation of stablecoins. The act establishes several regulatory requirements for stablecoin issuers, including mandatory asset reserves equal to the value of the issued stablecoins, prioritizing the repayment of funds to token holders in the event of bankruptcy, and compliance with anti-money laundering regulations and anti-terrorism sanctions to prevent the use of crypto assets for illegal activities.

Issuance and Regulatory Requirements

Anti-Money Laundering and National Security Compliance

Restrictions on Overseas Issuers and Tech Giants

Consumer Protection and Bankruptcy Priority

For existing issuers, such as Circle, which issues USDC, and Tether, which issues USDT, the GENIUS Act presents both opportunities and challenges.

On one hand, compliance with strict reserve and disclosure requirements is expected to enhance consumer confidence and attract more institutions to adopt their stablecoin products. On the other hand, issuers that cannot meet the new standards may need to restructure their asset portfolios.

For example, if a stablecoin issuer's current reserve assets do not fully comply with the act's requirements, it may be forced to convert non-compliant assets into U.S. Treasury bonds or other approved financial instruments. Although this transition process may be costly and time-consuming, it will help improve transparency in the long run.

The GENIUS Act is not only a regulatory framework for the stablecoin industry but also a strategic layout for the U.S. to strengthen the global dominance of the dollar through regulation. By promoting the compliance of stablecoins, anchoring dollar reserve assets, and restricting non-compliant overseas issuers, the act is reshaping the international competitiveness and financial dominance of the "digital dollar."

Stablecoins are pegged to the dollar, and the compliant stablecoin issuance promoted by the "digital dollar" overseas act is primarily anchored in dollars. This means that the circulation of each compliant stablecoin is essentially a "digital export" of the dollar, expanding the influence of the dollar globally.

Attracting International Capital into the U.S. Treasury Market The GENIUS Act requires compliant stablecoins to use high-quality, low-risk assets (such as U.S. Treasuries) as reserves. Institutions like JPMorgan expect stablecoin issuers to become major buyers of U.S. Treasuries, enhancing global demand for dollar assets and solidifying its status as a "global reserve currency."

Regulating Foreign Stablecoins to Ensure Dollar Dominance is Not Diluted By imposing restrictions on overseas issuers like Tether (such as establishing compliant subsidiaries or exiting the market), the act effectively prevents non-U.S. entities from "seizing" the dollar's digital currency discourse through the issuance of dollar-pegged stablecoins.

Supporters of the GENIUS Act believe that this legislation is the first attempt to establish a systematic regulatory framework for a key sector in the cryptocurrency industry—stablecoins. It not only provides basic protections for consumers but also paves the way for traditional financial institutions to enter the market, further promoting the growth of the digital currency market.

Christian Catalini, founder of the MIT Cryptoeconomics Lab, stated, "It's like opening a floodgate; you will see more issuers entering the market, and consumers will have more choices, leading to competition and innovation in the payment space."

Catalini also believes that the new regulations will help alleviate the burden on consumers to discern good projects from bad ones, instead promoting healthy competition among issuers through product quality.

"The next competition will be about who can provide consumers and businesses with more practical and feature-rich stablecoin products faster."

However, critics of the act argue that it is overly favorable to industry interests, with regulatory standards being too lenient to adequately protect consumers and effectively curb illegal trading activities involving stablecoins.

Massachusetts Democratic Senator Elizabeth Warren stated in a Senate speech on Monday, "While we urgently need a strong stablecoin regulatory bill, this weak bill is even worse than having no legislation at all."

In March of this year, World Liberty Financial, a cryptocurrency company supported by the Trump family, issued a stablecoin called "USD1." Earlier this month, Abu Dhabi-based investment firm MGX injected $2 billion into Binance, a deal that could also benefit companies under Trump.

Although the GENIUS Act explicitly prohibits sitting members of Congress or senior federal officials from issuing payment stablecoin products during their tenure to prevent potential conflicts of interest, Warren pointed out that the act "provides insufficient protection" against conflicts of interest arising from projects like Trump's.

"This act could even provide more opportunities for buyers of Trump tokens to receive benefits, such as tariff exemptions, pardons, or even government appointments."

Stablecoins are a type of crypto asset pegged to fiat currencies like the dollar, designed to achieve price stability and are seen as a key infrastructure for promoting the development of digital payments and financial technology tools.

Compared to other cryptocurrencies with volatile prices, stablecoins are designed to reduce price fluctuations, making them more practical for everyday payments and transactions. However, unregulated stablecoins may also pose risks, especially during mass sell-offs, which could prevent users from smoothly cashing out their assets.

Going forward, global regulators and participants in the crypto industry will closely monitor the implementation of the GENIUS Act after its passage. If the rollout goes smoothly, it could accelerate market adoption; conversely, delays or inconsistent enforcement could introduce new uncertainties. Additionally, as other countries develop their own stablecoin regulatory frameworks, the GENIUS Act is expected to become an important reference standard for international regulatory practices. Collaborative efforts among countries and the convergence of cross-border regulation are likely to promote the establishment of a more integrated global financial system, paving the way for the healthy development of digital assets.

Related: Senate Stablecoin Bill Vote Sparks Division Within the Democratic Party, Anti-Corruption Concerns Become a Controversial Focus

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