Senator Bill Hagerty is expected to introduce a bill on 4/2 to establish a comprehensive legal framework for stablecoins.
This bill, called the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, sets regulations for the issuance of stablecoins for payment purposes, and requires these assets to be backed by USD, Federal Reserve notes, Treasury bonds, or equivalent valuable assets.
In addition, the bill requires stablecoin issuers to publish monthly audited reports on their reserves, with strict criminal penalties for misreporting.
The issue of whether stablecoins are truly backed by highly liquid assets has become a major concern for authorities, especially after the controversies surrounding USDT from Tether. Lack of transparency in reserves could raise concerns about the ability to meet large-scale redemption needs during market volatility.
The GENIUS Act aims to provide legal clarity for stablecoins - digital assets pegged to the USD and other real assets. Supporters argue that a robust legal framework will enhance the credibility of stablecoins, paving the way for wider adoption in the financial system.
Senator Hagerty emphasized:
"My bill establishes a safe and growth-friendly legal framework, driving innovation and fulfilling the President's commitment to making America a global crypto hub."
The bill is co-sponsored by Senators Kirsten Gillibrand, Tim Scott, and Cynthia Lummis. It is also part of the Republican Party's long-term strategy to establish rules for the crypto industry, a sector that former President Donald Trump has shown particular interest in.
The Office of the Comptroller of the Currency (OCC), an independent bureau within the US Department of the Treasury, will be responsible for overseeing stablecoin issuers outside the banking system.
During the Trump administration, the crypto industry received many supportive signals, with a focus on reducing legal barriers and appointing regulators with an open-minded approach to the sector.
In his first week in office, he signed an executive order to establish a crypto task force, temporarily halt the development of a US central bank digital currency (CBDC), and assess the feasibility of creating a digital asset reserve.
While this order laid the groundwork for a legal framework for digital assets, any significant policy changes would require Congressional approval. Notably, both major US parties have expressed interest in regulating stablecoins.
The introduction of a new legal framework could help revive the stablecoin market in the US, which has been stagnating amid a challenging legal environment. According to Chainalysis' "Geography of Crypto 2024" report, stablecoin trading volume is gradually shifting away from US-based platforms, likely due to increasing legal obstacles.
In 2023, stablecoin flows into US crypto exchanges accounted for nearly 50% of global trading volume, but this has dropped below 40% by June 2024. The report also shows that the global adoption of stablecoins is outpacing the growth rate of the US dollar.
As of 3/2, the stablecoin market has reached a size of over $215 billion, with an annual trading volume exceeding $34 trillion.
Disclaimer: This article is for informational purposes only and not investment advice. Investors should do their own research before making decisions. We are not responsible for your investment decisions.
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