Recently, the US Senate Banking Committee made significant strides in the realm of cryptocurrency regulation by advancing the Guiding and Establishing National Innovation for US Stablecoins Act, otherwise known as the GENIUS Act, through a bipartisan vote of 18-6.
Sponsored by Senator Bill Hagerty (R-Tenn.), this proposed legislation aims to regulate stablecoins, enhancing their utility for cheaper and faster transactions on a global scale, particularly for users with access to smartphones.
However, the bill has ignited a fierce debate, especially from Senator Elizabeth Warren (D-Mass.), who has consistently raised alarms regarding the potential hazards that accompany such legislative measures.
Tension Emerges As Stablecoin Regulation Advances
In his opening remarks during the Senate Banking Committee markup, Senator Hagerty emphasized the necessity for regulatory clarity, asserting, “As the world modernizes its payment systems, the US cannot be left behind. Stablecoins can play a pivotal role in spurring that modernization.”
The senator also underscored the prospective advantages of establishing a clear regulatory framework, which could lead to improved transaction efficiency and a heightened demand for US Treasury securities.
Conversely, Senator Warren has expressed her concerns that the bill falls short in safeguarding consumers, taxpayers, and the broader economy against the risks associated with a potential stablecoin failure.
“This bill begs for more bailouts,” she asserted, stressing her belief that it could inadvertently lead to taxpayer-funded rescues for failing stablecoin issuers. Furthermore, Warren criticized the legislation for seemingly providing an advantage to tech billionaires like Elon Musk and Mark Zuckerberg, resulting in fears of concentrated financial power.
Despite Warren’s objections, Senator Hagerty contends that the GENIUS Act incorporates sufficient protections and regulatory measures to curb criminal behavior. Supporters maintain that the legislation mandates stablecoins to be backed by one-to-one reserve assets, which will be closely monitored by regulators.
Hurdles Ahead In Securing Full Senate Approval
The GENIUS Act introduces various key provisions aimed at regulating stablecoin issuers. It establishes licensing and oversight requirements, stipulating that stablecoin issuers with a market capitalization below $10 billion will be subject to state-level regulation, while larger issuers will come under the jurisdiction of the Federal Reserve and the Office of the Comptroller of the Currency (OCC).
In terms of transparency, the bill mandates that issuers submit monthly liquidity reports and maintain full transparency concerning their reserve compositions, ensuring that stablecoins are backed by reserves held in U.S. dollars or highly liquid assets at a 1:1 ratio.
Moreover, the legislation requires that issuers fulfill redemption requests in a timely manner, granting the Federal Reserve and OCC the authority to suspend licenses or impose penalties for non-compliance. It emphasizes anti-money laundering (AML) and know-your-customer (KYC) standards to prevent illicit activities.
Support for the bill has been expressed by various stakeholders, including New York Democrat Kirsten Gillibrand and freshman Maryland Democrat Angela Alsobrooks, both of whom advocate for the legislation despite not being on the committee. Treasury Secretary Scott Bessent and even Trump have shown a favorable view of stablecoins, with Bessent suggesting that they could bolster the dollar’s global dominance through increased demand for US currency.
While the advancement of the GENIUS Act in the Senate Banking Committee marks a crucial milestone in US crypto policy, the bill faces additional hurdles. It will necessitate at least 60 votes to pass in the Senate, underscoring the need for continued bipartisan cooperation.
Featured image from DALL-E, chart from TradingView.com
