plowunited.net – President Trump signed the GENIUS Act, the first federal statute regulating stablecoins, creating a national framework. The bill, named “Guiding and Establishing National Innovation for US Stablecoins,” passed the House with bipartisan support and the Senate with a strong majority. This law restricts stablecoin issuance to authorized firms such as bank subsidiaries, federally or state-regulated non-bank companies, or foreign firms regulated comparably by their home countries.
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Issuers must back stablecoins on a strict 1:1 basis with US currency, short-term government debt, or similarly secured funds. They also must disclose redemption policies, publish monthly reserve balances, and undergo regular audits. The law explicitly prohibits paying interest on stablecoin balances and denies any federal backing, meaning stablecoins will not be guaranteed by the US government or insured by federal agencies like the FDIC.
Stablecoins aim to offer the stability of traditional currencies, avoiding the volatility seen with cryptocurrencies like Bitcoin. Currently, over $200 billion in stablecoins circulate, mostly backed by US dollars. Stablecoins reduce transaction fees, speed up settlements, and attract crypto-savvy customers, helping businesses stay competitive. They also enable faster, cheaper international transactions, though failures like TerraUSD’s 2022 collapse highlight risks when stablecoins lack asset backing.
The GENIUS Act seeks to clarify the legal landscape, protect users, and reinforce the US dollar’s global role in digital finance. Advocates believe clear federal rules will prevent future collapses and enhance market confidence. However, critics argue the law lacks adequate consumer protections and could allow big tech and retail companies to issue stablecoins with less oversight than banks.
Controversies and Safeguards Surrounding the GENIUS Act
While the GENIUS Act marks progress, it faces scrutiny regarding its protections and political implications. Consumer groups criticize the law for not matching traditional banking protections, potentially exposing users to risks. They also worry about large corporations issuing stablecoins with limited regulation, potentially undermining financial stability.
President Trump’s association with digital currency raises questions about conflicts of interest. Trump was listed as a co-founder of World Liberty Financial, a company that launched a dollar-backed stablecoin in May. The company has since changed his status to “co-founder emeritus.” According to the GENIUS Act, Trump’s felony convictions would prevent him from holding any leadership role in such firms.
The law also bans stablecoin issuers from hiring individuals convicted of crimes like insider trading, embezzlement, cybercrime, money laundering, terrorism financing, or financial fraud. This measure aims to enhance trust and integrity within the stablecoin market.
Overall, the GENIUS Act represents a landmark effort to regulate a rapidly growing sector. It balances innovation with oversight, aiming to protect consumers and uphold financial stability. As the stablecoin industry evolves, further regulatory adjustments may be needed to address emerging challenges and maintain confidence in digital currencies. By establishing clear rules, the law helps ensure stablecoins support economic growth while minimizing risks. This federal framework could set a global precedent for cryptocurrency regulation in the years ahead.
