The Senate just advanced a bill to regulate stablecoins—what the GENIUS Act could mean for crypto and other investors

CNBC

a day ago

The U.S. Senate voted on Wednesday to advance the Guiding and Establishing National Innovation for U.S. Stablecoins, known as the GENIUS Act, setting it up for a final floor vote in the coming days.
The legislation aims to regulate the roughly $238 billion stablecoin market, per CoinDesk data, creating a clearer framework for banks, companies and other entities to issue the digital currencies.
The bill has bipartisan support, as well as criticism from both parties, making its fate in the Senate uncertain.
Here's what to know about what's included in the bill and how it could impact investors — even those who don't hold crypto.
A stablecoin is a type of cryptocurrency that is pegged to another asset, typically the U.S. dollar, which makes it less volatile than other cryptocurrencies tend to be.
The currency is used in a number of ways, including for payments and futures trading. Since they're also more predictable than regular crypto tokens, traders also use stablecoins "to sit out times of volatility or market downturns," says Nic Puckrin, a crypto analyst, investor and founder of The Coin Bureau.
"Stablecoins are also being used increasingly in emerging markets, like Latin America and Sub-Saharan Africa, to hedge against monetary instability, as well as for cheap cross-border payments," he adds.
"The use cases are very broad, and new ones are emerging all the time."
Ultimately, the GENIUS Act could make stablecoins more mainstream by bolstering trust in the currency and encouraging more competition in the market, Puckrin says.
"Right now, [the stablecoin market] is, for all intents and purposes, a duopoly. The market is nearly entirely dominated by Circle's USDC and Tether's USDT," Puckrin says.
Since the bill will create a clear pathway for banks and other entities to begin issuing stablecoins, "we'll likely see a flood of them rush into the market at the start," he says.
Big banks are gearing up to create their own coins. And while they may not all be successful, Puckrin says they will give consumers more options to find a stablecoin and issuer that works best for their needs.
Proponents say it will help safeguard investors and regulate the stablecoin market by ensuring issuers have the reserves needed to give stablecoins their value.
"If we fail to act now, not only will these benefits slip away — we will also fall behind in global competitiveness," Sen. Bill Hagerty (R-Tenn.), who introduced the bill, said in the Senate on Wednesday. "Without a regulatory framework, stablecoin innovation will proliferate overseas — not in America!"
Puckrin agrees stablecoin regulation could be a boon for the U.S. and its position in the global economy.
"Congress has also realized that instead of threatening the U.S. dollar, stablecoins can help cement its global dominance, because 99% of stablecoins are pegged to USD," he says. "With the dollar struggling to maintain its role in the global economy, the GENIUS Act could just be the thing that saves it."
Some supporters acknowledge the bill isn't perfect, but think it's better than not having regulation on stablecoins at all.
"The general outlook is that [the bill] will do better than anything that is currently happening," says Bezalel Eithan Raviv, CEO of blockchain security firm Lionsgate.
"It's a step in the right direction for everyone. There are ways to make it better. There are ways to make everything better. But this is the first one. Let's give it a try, and it will ripple in many ways."
Critics of the GENIUS Act argue it compromises crypto's decentralization and could enable corruption, such as officials favoring specific stablecoins under new regulations.
"We need guardrails that ensure that government officials aren't openly asking people to buy their coins in order to increase their personal profit or their family's profit," Sen. Jeff Merkley (D-Ore), who opposed the current version of the bill, said during Wednesday's session.
"Where are those guardrails in this bill? They're completely, totally absent."
Some critics also say the bill gives too many entities the ability to create new stablecoins which could make enforcement of the regulation standards more difficult.
"As long as issuers are clearly following the rules and regulations, more competition in the stablecoin landscape is both welcome and necessary," Puckrin says.
During the GENIUS Act's passage through the House, some members sought to attach amendments, including proposals from the Credit Card Competition Act. The latter, introduced in 2023 but previously stalled, aimed to boost credit card payment competition by requiring issuers to allow more than two networks (beyond mainly Visa and Mastercard) to process transactions.
Some legislators saw enough similarities between the credit card and stablecoin marketplaces to justify adding the CCCA to the GENIUS Act, but Senate Majority Leader John Thune (R-S.D.) nixed that plan, fearing the CCCA's inclusion could cost votes in favor of the larger bill.
Still, the GENIUS act could impact retailers outside of crypto, Puckrin says.
"We'll likely see stablecoins increasingly adopted as a digital alternative to the U.S. dollar, so banks, fintechs and merchants will be forced to offer stablecoin payment options," he says. "Eventually, payment networks like Visa and Mastercard will have to do so as well, which will lead to lower fees. The CCCA proposals are an inevitable evolution of the GENIUS Act. It will just take a little longer if it isn't written into law."