Source: Galaxy; Compiled by: Bai Shui, Jinse Finance
This report was initially privately sent to Galaxy's customers and counterparties. Those who invest or trade with Galaxy can directly receive high-quality research reports after the report's publication. —— Alex Thorn
Preface
As of the time of writing, the total global stablecoin circulation has exceeded $243 billion. Of this, $218 billion (90%) is fully collateralized and denominated in US dollars. By 2025, these stablecoins are expected to process over 120 million transactions monthly, with transaction values exceeding $700 billion. Stablecoins are widely used for cross-border payments, with transaction costs far lower than traditional remittances. However, currently, they are primarily in a legal gray area in the United States, with existing companies lacking sufficient regulation to truly develop within the traditional system, while traditional participants face too much regulatory uncertainty to use cryptocurrency channels.
[The rest of the translation follows the same professional and accurate approach, maintaining the technical and legal terminology while ensuring clear English translation.]By placing the Office of the Comptroller of the Currency (OCC) in the primary regulatory position for stablecoin issuers, thereby protecting the safety and soundness of the financial system. Whether banks or non-bank institutions, stablecoin issuers must register with the OCC or a state where their regulatory level is deemed equivalent to federal minimum standards. The liquidity of collateral reserves and their full reserve backing ensure that stablecoins can be comparable to money market funds.
Promoting vibrant innovation. Given the transparency, speed, and efficiency of public blockchains, stablecoins have immense utility and represent the vanguard of financial transaction settlement using such blockchains. They are widely used worldwide, covering individuals, businesses, and nation-states, significantly enhancing existing financial channels for US dollar circulation. The act grants "digital asset service providers" (essentially US trading companies and exchanges) a 3-year grace period, allowing them to trade existing but unregistered stablecoins, thus enabling the industry and market to transition smoothly to the new system.
Consolidating and expanding the dominance of the US dollar. Although the dollar's influence faces challenges due to international trade and geopolitical developments, in cyberspace, the dollar is unrivaled. Currently, over 99% of circulating stablecoins are denominated in US dollars. Bringing stablecoins under the regulatory scope of the world's most advanced and trusted capital market regulatory system will expand their usage and help export the dollar globally.
Supporting US debt issuance. By requiring almost entirely US Treasury-backed full reserves, the growth of stablecoins means an increase in the US government's borrowing capacity.
Democratic Criticism
9 Democrats stated they will vote against ending debate on the GENIUS Act, including 6 Senate Banking Committee members, 5 of whom previously voted to submit the bill to committee review.
These 9 Democrats wrote in a statement on Saturday night: "However, the bill currently has many urgent issues to be addressed, including adding stronger provisions such as anti-money laundering, foreign issuers, national security, maintaining the safety and soundness of the financial system, and holding non-compliant institutions accountable. While we are eager to continue working with colleagues to address these issues, we cannot support ending debate if the current version of the bill is ultimately submitted to Congress."
Politico reported this statement with the headline "Democrats Change Strategy, Oppose Senate Crypto Bill", but Senator Gallego denied this change, saying "This is not an arbitrary change by Democrats" and that "the bill submitted for full review has regressed on many of the progress we've made and does not include other improvements we seek."
Updated Revised Bill
The following will analyze the differences between the latest draft (revised) and the version passed by the Senate Banking Committee. We will analyze these changes based on five aspects that Gallego and Democrats still have concerns about: 1) Anti-money laundering; 2) Foreign issuers; 3) National security; 4) Maintaining the safety and soundness of our financial system; and 5) Holding non-compliant actions accountable.
Accountability after resignation, which can last up to six years.
Penalties for foreign issuers' violations (Section 8(c)(4))
After being found in violation, the maximum fine is $1 million per day.
The Treasury Department may seek an injunction to suspend trading in the United States.
Judicial review of Treasury Department actions (Section 8(d))
Allows foreign issuers to appeal non-compliance designations to the District of Columbia Circuit Court.
Enhanced regulatory powers (Section 6)
Authorized to revoke, remove officers, issue cease and desist orders, and other federal regulatory tools.
Each of these amendments was made within weeks after the bill was passed by an overwhelming majority in the committee (18 votes in favor, 6 votes against, with 5 Democrats joining Republicans), many of which reflected specific requests from Senate Banking Committee members who either voted against the bill in the committee or requested such modifications before the bill was submitted to Congress. Our analysis shows that almost all modifications make the bill more stringent for stablecoin issuers compared to the version passed by the Senate Banking Committee.
Conclusion
Overall, the latest version of the GENIUS Act represents a powerful victory for the cryptocurrency industry and traditional finance in promoting innovation and protecting consumers. It creates reasonable registration pathways while implementing strict oversight and regulatory provisions and imposing severe penalties for violations. The passage of the GENIUS Act will enhance the influence of the US dollar domestically and internationally, making daily transactions easier for individuals and businesses in domestic, cross-border, or international trade. All parties benefit: the cryptocurrency industry gains a viable development path with regulation, it protects the financial system, and helps the United States succeed in geopolitics and the rapidly changing global economy.
