US Congress Passes New Legislation for Stablecoin Regulation Amid Criticism
The United States Congress has successfully passed a new piece of legislation aimed at regulating stablecoins, which are cryptocurrencies pegged to the US dollar or other stable assets. The bill, known as the Genius Act, garnered significant support during voting, with nearly all Republican members and a substantial portion of Democratic representatives in favor. The legislation now awaits the signature of President Donald Trump, expected to be signed shortly.
The Genius Act establishes clear guidelines regarding who is permitted to issue stablecoins in the US, indicating that federal regulations will apply once a stablecoin's total market value exceeds $10 billion. Additionally, the law permits foreign entities to introduce stablecoins into the US market under certain conditions.
Stablecoins are designed to maintain a stable value by being tethered to established currencies, such as the US dollar, which typically shields them from the volatility that characterizes other cryptocurrencies like Bitcoin. However, recent events have highlighted that the perceived stability of stablecoins can be misleading. A notable example is the collapse of TerraUSD in May 2022, where the value plummeted from $0.99 to approximately $0.01, leading to significant losses in other cryptocurrencies and allegations of fraud against its creators.
As reported by various media outlets, the newly enacted legislation is part of a broader effort by the governing Republican party to address demands from the cryptocurrency industry. Critics, however, have raised concerns that the Genius Act may empower stablecoin issuers to engage in activities typically reserved for banks, all while escaping the regulatory obligations that banks must adhere to. Consumer advocates have previously warned that such legislation might promote the proliferation of cryptocurrencies falsely perceived as secure.
With President Trump's anticipated endorsement, the implications of this legislation for the future of cryptocurrency regulation in the US remain to be seen. Proponents argue it will bring much-needed structure to the industry, while detractors caution against potential risks to consumers and financial stability.