Stablecoin Bill's Fate Could Delay US Crypto Regulation

Stablecoin Bill's Fate Could Delay US Crypto Regulation

The fate of the GENIUS Act, a bill aimed at regulating stablecoins, could significantly impact the timeline for broader cryptocurrency legislation in the United States. According to prominent XRP lawyer John E. Deaton, failure to pass the bill could push major regulatory clarity back to 2029.

Deaton, known for his work on the XRP legal case, argues that the GENIUS Act, while focusing on stablecoins, is relatively uncontroversial and aligns with national interests. He expresses concern that if this bill fails, more complex legislation – such as market structure bills, the Lummis-Gillibrand bill, and tax reforms – will likely be delayed indefinitely.

GENIUS Act: Focus on Stablecoin Regulation

Spearheaded by Senator Bill Hagerty, the GENIUS Act seeks to establish a clear legal framework for stablecoin issuance in the US. The bill prioritizes robust reserve requirements from issuers to safeguard users and bolster transparency.

Senator Hagerty highlighted in a CNBC interview that the current lack of regulation has driven many crypto projects overseas. The GENIUS Act aims to counter this trend by providing a defined regulatory pathway for stablecoin issuers. He also noted the SEC's enforcement actions have created market confusion, emphasizing the bill's potential to bring much-needed legal certainty to both consumers and businesses. Despite concerns, Senator Kirsten Gillibrand expressed optimism about the bill's passage this week.

Industry Support for the GENIUS Act

Despite allegations of fraud and corruption, the GENIUS Act enjoys widespread support within the crypto industry. Coinbase's Chief Policy Officer, Faryar Shirzad, considers stablecoin legislation a "national priority," emphasizing the US's need to maintain its leadership in blockchain-based finance and the dominance of the US dollar-pegged stablecoins. He compares the current situation to the introduction of money market funds in the 1970s and 1980s, suggesting the financial sector can adapt to this competition.

Shirzad also points out the bill's potential to reinforce the global role of the dollar and maintain US centrality in international finance, emphasizing its broader strategic implications beyond mere technological advancement.

Challenges Despite Bipartisan Support

Although the GENIUS Act enjoys bipartisan support, challenges remain. Senator Hagerty noted resistance from lawmakers who prefer centralized financial control. Critics, such as Senator Elizabeth Warren, have expressed caution and concerns about potential increased financial risk and reduced regulatory oversight.

XRP lawyer John Deaton pointed out a potential shortcoming: the bill doesn't permit stablecoin holders to earn yield. He acknowledges that any yield-bearing provision would likely face banking industry opposition due to competition with deposit accounts. He succinctly stated, "The Bank Lobby is real."

The Senate's upcoming vote on the GENIUS Act is crucial. If the bill fails, the momentum for other crypto-related legislation, including potential reforms like BitBonds or crypto tax laws, might stall until the next administration, according to Deaton. This underscores the significant importance of this stablecoin legislation for the future of crypto regulation in the US.

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