GENIUS, the law to regulate stablecoins in the United States

The Senate Banking Committee has approved the GENIUS Act, which establishes a regulatory framework for stablecoins in the United States. 

The U.S. Senate Banking Committee has approved the GENIUS Act, an initiative to regulate stablecoins pegged to the U.S. dollar.

The regulatory proposal, led by Republican Senator Bill Hagerty, seeks to establish clear rules for issuers like Tether and Circle, which are behind the development of USDT and USDC, respectively, the two largest stablecoins on the market. 

Regulatory approval came after a debate session where Democrats like Elizabeth Warren criticized the bill text for leaving "gaps" that could threaten national security. The bill to regulate stablecoins must now be debated in the full Senate and then in the House of Representatives, in a process that could take several months. 

The GENIUS Act: From Proposal to Initial Passage

Initially introduced in February by Senator Bill Hagerty, a representative from the state of Tennessee, the National Innovation Guidance and Establishment for US Stablecoins (GENIUS) Act has received bipartisan support since its inception. The law, which has been championed by figures such as Tim Scott, Kirsten Gillibrand, and Cynthia Lummis, is based on a draft discussed in October 2024 that sought to clarify the legal status of these digital assets.

The bill prioritizes the creation of a framework "safe and pro-growth", According to Hagerty, aligned with President Donald Trump's promise to turn the country into the "cryptocurrency capital of the world"During the committee hearing, Republicans argued for the urgency of regulating the stablecoin market, which is valued at over $236.110 billion, according to CoinGecko at the time of writing. 

Tim Scott, chairman of the Banking Committee, stressed that the bill was the product of a collaborative effort "day and night", including weekends, to strike a balance between innovation and consumer protection. However, the process was not without tensions. Democrats proposed amendments to add stricter controls, such as emission limits and greater transparency requirements, but all were rejected in votes marked by party lines, drawing criticism from lawmakers like Warren, who called "craziness" move forward with the bill without closing the gaps identified.

Key objectives of the GENIUS Act

The bill in question is designed to regulate stablecoins in the United States. It seeks to create a clear and predictable regulatory framework that allows stablecoin issuers to operate safely and transparently in the country. 

The law has several key objectives, such as protecting consumers through strict disclosure requirements and risk management. This will ensure that users are well informed about the risks associated with stablecoins and have protection mechanisms in place should problems arise. Furthermore, this law encourages innovation by eliminating regulatory uncertainty and creating an enabling environment for the development of new technologies and business models in this field. 

This regulatory project also focuses on financial stability, overseeing the reserves that back stablecoins to avoid systemic risks that could affect the financial system.

The next steps in the legislative process

Following its committee approval, the GENIUS Act will face a vote in the Senate floor, where further debate is expected. It will then need to be reconciled with similar proposals in the House of Representatives, such as the bill led by Republican French Hill, which also seeks to regulate stablecoins but with divergent approaches to state oversight.

Analysts predict that if the legislation moves forward, it could take effect before the end of this year. David Sacks, the White House cryptocurrency and artificial intelligence czar, publicly backed the initiative, arguing that stablecoins could "strengthen the dollar as a global reserve currency» and generate greater demand for Treasury bonds.

In short, the GENIUS Act represents a significant step forward in efforts to regulate stablecoins in the United States, seeking to balance innovation with consumer protection and financial stability. Its path through the legislative process will be fraught with debate and negotiation, and the final outcome will have a profound impact on the future of cryptocurrencies in the country.

Investing in cryptoassets is not fully regulated, may not be suitable for retail investors due to high volatility and there is a risk of losing all invested amounts.