President Trump signed the Genius Act on Friday, marking a significant moment in cryptocurrency legislation.
This new law establishes a regulatory framework aimed at ensuring payment stability and comes after a tumultuous week in the House.
Amid chaos, the House experienced an unusually long voting session. Republicans pushed through a deal late Wednesday to maintain voting on Thursday without halting proceedings.
Ultimately, the House approved the Genius Act with a vote of 308-122, gaining the support of 102 Democrats alongside most Republicans.
Here are five key points about the newly established Stablecoin law:
The Crypto Industry’s “Seal of Approval”
Rob Nolan, a partner at Duane Morris, indicated that this act is a “first step” for the U.S. government regarding digital assets.
As the first major digital asset legislation to pass Congress and receive presidential approval, it lends a fresh sense of legitimacy to the sector.
“When there’s a law, it’s significant… it essentially gives the industry a good housekeeping seal of approval,” said Ian Katz, managing partner at Capital Alpha. “This marks Congress and the President recognizing the legitimacy of this industry.”
Katz added that the law could spur activity within the industry, suggesting that this is what many needed to truly take off.
The bill’s passage signifies a dramatic turnaround for the crypto industry in Washington.
After the collapse of Crypto Exchange FTX and the fraud convictions of its founder Sam Bankman-Fried in 2022, the sector faced a challenging environment. The Biden administration’s SEC chair, Gary Gensler, was also seen as pursuing a strict enforcement approach rather than clear regulatory guidelines.
In contrast, Trump appears to have embraced the crypto world in his second term, appointing David Sack as the Artificial Intelligence and Crypto Emperor, hosting crypto leaders at the White House, and issuing an executive order to establish strategic Bitcoin reserves.
The Wider Crypto Framework Still in Progress
While the Genius Act marks a notable victory for the industry, it is only a piece of the broader regulatory landscape surrounding digital assets.
“This is just a small part of the cryptocurrency ecosystem,” Nolan noted.
Stablecoins, which are pegged to other assets like the U.S. dollar for price stability, represent just one type of cryptocurrency.
Legislation for a more extensive crypto framework has yet to pass. Key discussions focus on how to divide oversight between the SEC and the Commodity Futures Trading Commission.
Last week, the House passed a version of the digital asset market framework, but the Senate is moving more deliberately and is preparing its own discussion draft.
Although there were plans to pass both the stablecoin and market structure laws before Congress’s August recess, the White House and GOP leadership now aim to finalize the second important crypto bill by the end of September.
Financial Regulators Taking on New Roles
The Genius Act will see several financial regulators taking on responsibilities related to stablecoin oversight.
The Office of the Currency Secretary (OCC) will regulate standalone stablecoin issuers, while IT, the Federal Reserve, the Federal Deposit Insurance Corporation, and the National Credit Union Bureau will oversee existing stablecoin-related agencies.
Stablecoin issuers may expedite the approval process by becoming charter banks under the OCC.
Banking Industry Expresses Concerns Over Crypto Charters
Not everyone in the banking sector is pleased with the current direction, especially with several stablecoin issuers pursuing bank charters.
In a letter to the OCC, major banking associations raised concerns about whether stablecoin issuers are performing activities typical of National Trust Banks and urged the office to delay processing related applications.
“With significant concerns impacting policy and legal aspects of chartering the banking system, we urge the OCC to postpone application considerations,” said the banking group.
Traditional Players Weighing Stablecoin Adoption
Despite some apprehensions, many traditional financial institutions are actively exploring or adopting stablecoins.
Bank of America’s CEO Brian Moynihan recently mentioned that his bank is working on launching a stablecoin. Similarly, Citigroup’s CEO Jane Fraser indicated that her bank is considering a move in that direction, according to reports.
JPMorgan Chase announced last month that it will roll out deposit tokens akin to stablecoins, dubbed JPMD. CEO Jamie Dimon commented last week on their ongoing involvement with stablecoins.
Katz expressed hope that traditional financial players won’t simply focus on a standalone stablecoin publisher but will instead grasp the broader market potential.
Some are still uncertain about the size and growth of this market but recognize the need to plan carefully to avoid being left behind should stablecoins gain wider acceptance in the future.
