The wild west days of the cryptocurrency market may be coming to an end as Congress takes a step closer to passing first-of-its-kind legislation.
The GENIUS Act, officially the Guiding and Establishing National Innovation for U.S. Stablecoins Act, passed a key procedural hurdle in the Senate on May 19. The bipartisan vote limits debate on the bill and allows the Senate to move forward to final passage. The bill would create a regulatory framework for stablecoins, a type of cryptocurrency tied to the value of an asset like the U.S. dollar.
The bill remains controversial and far from final passage. A vote likely won’t happen until after Memorial Day at the end of the month.
Still, the bill is considered a major win for the crypto industry. The industry-backed bill would help protect consumers and set industry standards that could allow stablecoins to become mainstream for digital payments and other financial instruments, advocates say.
The bill "is the type of policy proposal that could lead to frictionless payments and help millions of Americans gain greater access to the financial system,” said Austen Jensen, Retail Industry Leaders Association executive vice president of government affairs.
The bill also “reinforces U.S. leadership in digital assets,” Sarah Milby, Blockchain Association Interim Chief Executive and Head of Policy, said in a statement.
What is a stablecoin?
A stablecoin is a type of cryptocurrency designed to maintain a stable value relative to an asset, like the U.S. dollar.
Pegging the unit to a stable asset helps minimize price fluctuations, making them more suitable for everyday transactions and as a reliable store of value. Many stablecoins are also backed by reserves of fiat currency or other assets like U.S. Treasuries.
What is the GENIUS Act?
The bill establishes rules for stablecoin issuers, including:
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Firms must hold a reserve of assets underlying the stablecoin so consumers can always easily cash out their holdings.
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Issuers must prioritize stablecoin holders for repayment in case of bankruptcy.
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Issuers must abide by some anti-money laundering rules and anti-terrorism sanctions.
The bill also would prohibit “any member of Congress or senior executive branch official from issuing a payment stablecoin product during their time in public service.”
What do critics say about the GENIUS Act?
Critics say the bill doesn’t go far enough to protect consumers or stop President Donald Trump from lining his own pockets. World Liberty Financial, a crypto venture linked to Trump, launched USD1, a U.S. dollar-backed stablecoin.