More Stable Than Genius
Let’s first get this out of the way – I’m a bit disappointed by the name. At the beginning of the summer, two names were in play as the Senate was working on the Genius Act and the House was working on the Stable Act. The chance existed for the ultimate legislation to be the Stable Genius Act, but it was not to be. Alas.
The Genius Act was ultimately passed with solid bipartisan majorities in the House and the Senate and is almost certainly the opening act in a new crypto friendly regulatory regime. Some highlights include (1) high standards for redeemability and backing by liquid assets (1:1 with backing provided by highly liquid and stable assets; (2) limited pool of issuers (federal or state regulated banks, credit unions, state licensed stablecoin issuers, and a special category of non-financial corporate issuers, who can only issue stablecoins upon the approval of a committee made up of Treasury, the FDIC, and the Federal Reserve, who are collectively referred to as the Stablecoin Certification Review Committee or SCRC); and (3) regulation being overseen by each issuing entities primary regulator with a heavy tilt toward the OCC, which is a bureau of Treasury. The SCRC approves state certification, but has been directed to fast-track certification for states that have existing prudential digital asset rules, such as New York and Wyoming.
To me, it seems that the Genius Act creates a bank-like regime that oversees a strictly-regulated, payments system based in the blockchain. It is a long way from the crypto wild west. Issuers cannot pay any form of interest to stablecoin holders nor can they monetize nonpublic personal data from transactions nor tie stablecoin issuance to other products or services (though they may find ways to make the processes smoother for internal customers, as seems to happen). Stablecoin issuers would also be subject to AML and OFAC compliance.
Will this be an opening for innovation in cryptocurrency or serve to strengthen established banks and other payment system providers? Will it actually disrupt payment systems or help established players become even more established?
Stay tuned as we keep an eye on things and see where this goes next.