Law & Policy

Last week, Senator Bill Hagerty introduced the GENIUS Act for the legislation of stablecoins. This law will mark a key milestone in the future regulation of crypto. Let’s dive into some of the main elements of the draft act, looking at what’s good and what we might need to be cautious of… 🧵

Regulation and policy. Have a background in politics and competition economics. Decentralise, redistribute, rebel

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Generally speaking, this looks like good news. Firstly, this indicates that legislation will be tailored to specific areas of crypto, in this case stablecoins – which is so important. Generalised legislation/regulation of all crypto wouldn’t be effective.

Secondly, the early draft puts the “stable” into stablecoins. If this bill is going to do anything, it is going to make stablecoins safer and more reliable – great news. But how?

Stablecoins get a CLEAR definition 🥳 This should aid the reliability of stablecoins by giving regulators a first-layer basic qualification for what stablecoins are, helping them to ensure complicity of issuers. However, I think the bill could do with a few additions here…

One of the problems with US legislation is how hard it can be to change, it is imperative that crypto legislation is different. So, I suggest a mechanism that allows a periodic review of key definitions like this, potentially leading to legislative and regulatory amendments 📝

Another of the good elements is how the draft proposes establishing federal standards for stablecoin issuers. This issues requirements for stablecoin reserves to be fully backed – making stablecoin holdings safer and better regulated

One of the exciting parts of the draft is that smaller issuers who meet certain financial requirements can choose to follow state stablecoin regulations rather than the federal ones as long as these state rules are “substantially similar” to the federal law…

Although they must be similar, this raises opportunities for states to establish attractive and advanced regulatory frameworks for stablecoins and crypto more generally. How great would it be if a less economically prosperous state could become a new hub for crypto by creating high-quality regulation?

Lastly, something to be cautious of. The draft proposes new federal/state supervisory powers over issuers – in this draft these are all good and necessary. But there is some lack of clarity over some of these e.g. as to when authorities can utilise these. We must stay vigilant in the face of legislation that enables mass establishment-involved in crypto and DeFi. Remember that this administration will not want crypto to operate in the same way the industry does!

The nature of stablecoins, crypto and blockchain etc is highly malleable. Their digital nature means they ar constantly changing, we are constantly seeing incredible technological developments and innovations in our sphere – therefore definitions like this need to be UNENTRENCHED