The GENIUS Act May Have Overshadowed a Significant Development: The Progress of the First Stablecoin Bill in the United States

The recent excitement around CZ and BNB Chain may have overshadowed a significant development: the major progress of the first stablecoin bill in the United States.

The recent excitement around CZ and BNB Chain may have overshadowed a significant development: the major progress of the first stablecoin bill in the United States.

On March 13 local time, the U.S. Senate Banking Committee passed the "Guidance and Establishment of the U.S. Stablecoin National Innovation Act" (referred to as the "GENIUS Act") with a vote of 18 to 6. The bill now needs at least 60 votes in the full Senate to proceed to the House of Representatives for review, and ultimately be signed by President Trump.

Previous reports indicated that the Trump administration set August as the deadline for passing the stablecoin bill. The bill aims to create a framework for the issuance and regulation of private stablecoins in the U.S., covering aspects such as capital requirements, risk management, and consumer protection.

The initiative for this stablecoin bill came from bipartisan senators Bill Hagerty and Mark Warner, who jointly introduced the bipartisan "GENIUS Act: Stablecoin legislation" in December last year. The bill proposes a new regulatory framework for private stablecoins, aiming to foster innovation in the financial sector while safeguarding consumers and the broader economy.

The bill mandates that stablecoin issuers hold high-quality liquid assets in an amount equal to or greater than the outstanding stablecoin balances, with permissible assets including U.S. Treasury securities, deposits in federally insured banks, and money market funds. Stablecoin issuers would be required to maintain a minimum capital adequacy ratio of 8 percent of their total assets, in line with the regulatory standards for federal banking organizations.

The legislation also includes provisions for consumer protection, requiring stablecoin issuers to provide clear and concise disclosures to consumers about the terms and conditions of their stablecoins. It further grants the Federal Trade Commission (FTC) the authority to pursue any deceptive or unfair acts or practices by stablecoin issuers.

The Trump administration has expressed a strong interest in advancing legislation for cryptocurrencies and stablecoins this year. Earlier this year, the administration officials hinted at the possibility of introducing an executive order on cryptocurrencies, which could focus on issues such as money laundering, financial stability, and consumer protection in the rapidly evolving crypto ecosystem.

The administration officials also mentioned exploring the creation of a new R3 blockchain initiative, which could be structured as a public-private partnership with a focus on cross-border payments, trade finance, and capital markets.

As the administration officials navigate the technical and legal complexities of cryptocurrencies, they aim to provide clear guidance and a regulatory framework for responsible innovation in the sector.

The bipartisan nature of the bill and the urgency expressed by the Trump administration in setting a time frame for passing the stablecoin bill nodeliver surprising.

The Impact of the Bill on the Stablecoin Landscape: Circle's Counterattack Against Tether

The primary impact of the GENIUS Act is the increase in compliance costs, which will give an advantage to compliant issuers and traditional giants.

Currently, the largest stablecoin issuer, Tether, has a market share of over 60% with its USDT, holding an absolute dominant position, but it still has a long way to go in terms of compliance.

Tether is not a domestic U.S. project; its registration, legal entity, and core operations are all overseas. Earlier this year, Tether announced that after obtaining a Digital Asset Service Provider (DASP) license in El Salvador, it would complete all procedures to relocate to El Salvador and establish its headquarters there.

Meanwhile, the "Markets in Crypto-Assets Regulation" (MiCA) will come into full effect on December 30, 2024. Tether has not been approved to exit the European market, while Circle, Crypto.com, Société Générale, and other 10 institutions have been authorized to issue euro and dollar stablecoins.

Tether is about to face regulatory pressure from the U.S. GENIUS Act. Circle's co-founder Jeremy Allaire advocates that all U.S. dollar-based stablecoin issuers should register in the U.S. for the protection of consumers and to ensure fair competition in the cryptocurrency market.

"If you want to offer your dollar stablecoin in the U.S., you should register in the U.S., as we must do elsewhere," said Allaire, referring to the offshore status of Tether.

His comments come as the U.S. Senate Banking Committee prepares to vote on the bipartisan "GENIUS Act: Stablecoin legislation," which aims to create a framework for the issuance and regulation of private stablecoins in the U.S.

The bill, introduced by Senators Bill Hagerty (R-TN) and Mark Warner (D-VA), would require stablecoin issuers to maintain reserves in liquid assets, such as U.S. Treasury securities or deposits in federally insured banks, in an amount equal to or greater than the outstanding stablecoin balances. It also sets a minimum capital adequacy ratio of 8 percent of their