The GENIUS Act: A bill that would allow banks to issue stablecoins

A bill called the GENIUS Act took a key step towards becoming law. Among other things, it would allow banks — regular, normal banks — to issue a form of cryptocurrency called “stablecoins.”

Unless you are super into cryptocurrency, it’s really easy to tune out crypto news — just like you tune out your cousin who spends family get-togethers bragging about all the money he’s making from Bitcoin.

But you might want to actually pay attention to the piece of crypto news that came out of the U.S. Senate last night: A bill called the GENIUS Act took a key step towards becoming law.

Among other things, it would allow banks — regular, normal banks — to issue a form of cryptocurrency called “stablecoins.”

Unlike Bitcoin or Dogecoin or other cryptocurrencies whose values are extremely volatile, stablecoins are supposed to be stable. One of them should equal one dollar, today, tomorrow and forever.

Dante Disparte is chief strategy officer at Circle, which has issued $61 billion worth of stablecoins, “a digital dollar that has supported activities around the world in the way that you and I would send emails to one another,” he said.

Unlike good old fashioned greenbacks, stablecoins move at the speed of the internet — no time wasted for financial clearing houses or cross-border transaction settlements.

Disparte said if the GENIUS Act becomes law, stablecoins will modernize our payment systems.

“Cross border payments is one prevalent use case that is pretty common and has limited competitive interest around the world. Peer-to-peer remittances is another really important real world use case,” said Disparte.

Think Venmo, only with stablecoins.

But for now, they’re mostly used for crypto trading. Speculators use stablecoins to borrow and buy and sell more crypto, which is why Duke lecturing fellow Lee Reiners is worried about banks like, say, JPMorgan Chase or Bank of America getting in on the action.

“Problems in the crypto sector could, through stablecoins, spill into the banking system,” said Reiners.

For instance, say stablecoin companies buy billions in U.S. treasury bonds to back their coins. Reiners fears a bank run scenario, where if everyone panics and tries to redeem their stablecoins for actual fiat currency, those companies will have to sell their bonds en masse.

“So the price of treasuries could potentially plummet the bigger the stable coin market gets, potentially driving up borrowing costs for for the rest of us in the real economy,” said Reiners.

Stablecoin enthusiasts say those risks are overblown, and that the bill offers rules and regulations that don’t exist right now.

“You want to make sure that the U.S. government and all the respective agencies can supervise them, can enforce against wrongdoing,” said Salah Ghazzal of the industry trade group Blockchain Association.

The Senate bill, which received bipartisan support, must be reconciled with a similar bill making its way through the House before it can be sent to President Donald Trump.

Related Topics: