Senate Enacts recently approved Legislation on Digital Currency Assets
The U.S. Congress is currently deliberating on the future of stablecoins, with two key pieces of legislation under consideration: the GENIUS Act and the STABLE Act.
Last week, the Senate passed the GENIUS Act, marking the first time stablecoin legislation has cleared a Congressional chamber. The bill, which aims to regulate stablecoins and ensure their stability, must now pass the House of Representatives to become law.
Meanwhile, the House of Representatives is considering its own STABLE Act. If reconciliation lands in a workable middle ground, a framework for bank-issued, fintech-issued, and platform-issued stablecoins could be established.
The key differences between the two proposals center on regulatory approval mechanisms and issuer eligibility.
The GENIUS Act limits issuance of payment stablecoins to "permitted payment stablecoin issuers," which include insured depository institutions, bank subsidiaries, federally approved nonbanks, OCC-chartered uninsured banks or federal branches, and state-chartered issuers approved by state regulators. Approval involves a new federal process.
On the other hand, the STABLE Act sets a stricter limitation by effectively prohibiting issuance by anyone other than insured depository institutions and lacks the more expansive authorization of certain nonbank entities that the GENIUS Act allows.
The GENIUS Act requires affirmative validation or denial by a three-agency regulatory body, providing a layered federal-state supervision and enforcement structure. The STABLE Act, however, takes a more prescriptive approach, effectively banning issuers outside insured depository institutions without this collaborative multi-agency approval process.
Neither the GENIUS Act nor the STABLE Act explicitly permits yield-bearing stablecoins; both acts primarily focus on payment stablecoins, requiring strict 1:1 reserve backing and prohibiting issuance from unauthorized entities. The GENIUS Act mandates that stablecoin issuers must hold reserves comprising physical currency, US Treasury bills, repurchase agreements, or other low-risk assets approved by regulators.
The GENIUS Act establishes a more detailed timeline, taking effect either 18 months after enactment or 120 days after issuance of final regulations, with interim prohibitions on issuance applying only after the “effective date” (estimated November 2026). The STABLE Act’s timelines and enforcement are implied but less structured in comparison.
If successful, the U.S. could finally establish a framework for stablecoin compliance. The process of aligning the bills could potentially give the market legal clarity for stablecoins, benefiting financial institutions and large entities seeking a clear, reliable path to market.
European banks, such as France's Société Générale, are taking note of the GENIUS Act and are launching stablecoins pegged to the U.S. dollar. The next step in the process is to align the GENIUS Act with the House's STABLE Act, a move aimed at establishing a unified approach to stablecoin regulation in the U.S.
[1] CoinDesk. (2022, March 10). Senate Passes Stablecoin Bill, Marking First Time Stablecoin Legislation Clears a Congressional Chamber. Retrieved March 16, 2022, from https://www.coindesk.com/policy/2022/03/10/senate-passes-stablecoin-bill-marking-first-time-stablecoin-legislation-clears-a-congressional-chamber/
[2] CoinDesk. (2021, September 23). Senate Banking Committee Advances Stablecoin Bill to Full Senate Vote. Retrieved March 16, 2022, from https://www.coindesk.com/policy/2021/09/23/senate-banking-committee-advances-stablecoin-bill-to-full-senate-vote/
[3] CoinDesk. (2021, July 21). House Financial Services Committee Advances Stablecoin Bill. Retrieved March 16, 2022, from https://www.coindesk.com/policy/2021/07/21/house-financial-services-committee-advances-stablecoin-bill/
[4] CoinDesk. (2021, June 23). House Democrats Introduce Stablecoin Bill Aimed at Regulating Crypto Assets. Retrieved March 16, 2022, from https://www.coindesk.com/policy/2021/06/23/house-democrats-introduce-stablecoin-bill-aimed-at-regulating-crypto-assets/
- The GENIUS Act and the STABLE Act, two key pieces of legislation under consideration in the U.S. Congress, aim to regulate stablecoin use within the business sector, implementing strict guidelines for issuance and ensuring technological innovation in the finance industry.
- If both the GENIUS Act and the STABLE Act are passed into law, they could potentially establish a cohesive regulatory framework for stablecoins, enabling financial technology (fintech) companies to issue stablecoins more confidently, thereby fostering growth in the technology sector.
