genius act
The GENIUS Act (Guiding and Establishing National Innovation for U.S. Stablecoins Act) recently passed the US House of Representatives, following its passage in the Senate. It is a landmark piece of legislation aimed at creating a comprehensive regulatory framework for payment stablecoins.
Here are the main ideas in the GENIUS Act:
Comprehensive Regulatory Framework for Stablecoins:
The Act establishes a federal-state supervision and enforcement regime specifically for payment stablecoin issuers. It defines "payment stablecoins" as digital assets intended for payment or settlement, redeemable for a fixed amount of monetary value, and represented by issuers to maintain a stable value.
Dual Federal-State Oversight:
The GENIUS Act creates a dual regulatory structure, allowing both federally approved and state-regulated entities to issue stablecoins, subject to compliance with baseline federal standards. This aims to provide flexibility while ensuring uniform safeguards.
Prohibition on Unlicensed Stablecoin Issuance:
The Act prohibits issuing payment stablecoins without proper authorization, with the prohibition taking effect at an estimated date in November 2026.
Strict Requirements for Issuers:
Stablecoin issuers will be required to adhere to stringent standards, including:
- Capital and liquidity requirements.
- Interest rate risk controls.
- Bank Secrecy Act and sanctions compliance.
- Cybersecurity and operational safeguards.
- Full reserve backing, with provisions for regular audits and transparency.
Consumer Protection:
The Act includes critical consumer protections, such as third-party vendor oversight, additional resolution framework tools, and language encouraging issuers to consider the benefit to the public and underserved individuals.
Protection of Individual Digital Asset Custody:
It explicitly protects an individual's right to maintain a hardware or software wallet for lawful custody of digital assets and to engage in direct, peer-to-peer transactions.
Prohibition of Central Bank Digital Currency (CBDC) for Individuals:
The Act prohibits a Federal Reserve bank from offering products or services directly to an individual, maintaining an account on behalf of an individual, or issuing a central bank digital currency (i.e., a digital dollar).
National Security and Anti-Money Laundering:
The GENIUS Act aims to protect national security and the American financial system by preventing foreign stablecoins from accessing U.S. markets without proper oversight and enhances anti-money laundering and sanctions compliance measures.
Amendments to Bankruptcy Code:
It amends the Bankruptcy Code to exclude required payment stablecoin reserves from the property of a debtor's estate, while referring to stablecoin holders' redemption rights as "claims" in bankruptcy.