US GENIUS Act Enacted: New Regulations Drastically Reshape Stablecoin Market, Boost DeFi
US GENIUS Act Enacted: New Regulations Drastically Reshape Stablecoin Market, Boost DeFi
The landmark Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act has officially passed, introducing stringent new regulations designed to prevent technology giants and Wall Street banks from dominating the burgeoning stablecoin market. The legislation, which secured significant bipartisan support last week with over 300 House votes, including 102 Democrats, is set to redefine the landscape for digital currencies in the United States.
A pivotal clause within the GENIUS Act, dubbed the “Libra clause” by Circle Chief Strategy Officer Dante Disparte, mandates that any non-bank entity seeking to issue a dollar-pegged stablecoin must establish a standalone, non-bank subsidiary. These entities will face rigorous antitrust reviews and require approval from a Treasury Department committee, effectively creating a high barrier to entry for Big Tech firms. Banks are not exempt, as they too must house stablecoin operations in legally separate subsidiaries with no risk-taking or lending functions, a structure even more conservative than current deposit-token models.
Disparte emphasized that these new rules are designed to benefit U.S. consumers, market participants, and the U.S. dollar by providing long-sought legal and regulatory clarity for crypto. He stated, “Crypto is finally getting what it wanted: legitimization, a path for legal and regulatory clarity in the United States and an opportunity to compete.”
Crucially, the GENIUS Act bans interest-bearing stablecoins and imposes strict disclosure standards, along with criminal penalties for unbacked tokens, effectively eliminating “Terra-style” experiments. While critics worry this ban could hinder consumer adoption, analysts suggest it will significantly redirect investor demand towards decentralized finance (DeFi) platforms, particularly those on Ethereum. With stablecoins unable to offer yield, DeFi protocols become the primary avenue for generating passive income on-chain, potentially ushering in a “DeFi summer” driven by institutional capital seeking returns.
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