After months of uncertainty, the GENIUS Act passed the United States Senate.
A similar bill is moving through the House with passage likely meaning some reconciliation is required.
This is the bill that will regulate stablecoin in the United States. With bipartisan support, the bill passed 68-30. Such a margin means there is likely a consistent amount of support in the House.
Even signing into law would mean that the United States has placed itself as one of the crypto leaders in the world.
Stablecoins are the future of payments. There is little doubt about that. Some of the largest financial institutions are resident in the US. This bill also allows for the potential of Big Tech to enter the arena.
This was a bill that was deemed a slam dunk when it was first introduced. Politics appeared to get in the way, although it did end up moving through rather easily. Procedure was used to highlight some things certain political members disagreed with.
The ultimate outcome of this bill probably is the massive explosion of stablecoins. Over the last couple months, we discussed news covering the intentions of certain companies with regards to their stablecoin plans. The latest was the reports that Amazon and Walmart are looking into becoming issuers.
Treasury Secretary Scott Bessent, who will have significant regulatory authority under the bill, indicated during a recent Senate appropriations hearing that the US stablecoin market could potentially grow nearly eightfold, reaching over $2 trillion in the coming years.
This is a sentiment I echoed even before the Secretary. A 10x of the stablecoin market seemed logical. As we are moving into an agentic world, we can easily forecast the number of transaction skyrocketing. Commercial activity is going to require more money.
Expansion in the number of stablecoins will ensure this. It is also going to be the replacement for bank deposits as the currency of transfer. Instead, stablecoins will serve this purpose.
It also provides the infrastructure rails for global payments. This will be a combination of blockchain along with networks built out by major institutions.
The EU is rushing to bring out a Central Bank Digital Currency (CBDC). With the passage of this bill, the US could be setting itself up as the writer of the global framework.
It could be a death blow to CBDCs.
By establishing a regulatory framework, the issuers of stablecoins would compete on equal footing against CBDCs. It would not only apply to users but also infrastructure.
A CBDC could be accepted within a nation's borders, as the government can force the population into the system. However, that all changes once we enter the global arena. Foreign entities would be under no obligation to accept the currency. With so many other options out there, this could render the CBDC mostly useless.
Of course, payments is just one aspect of global finance. The building on top is what really advances things. Wall Street excels at this, as we are seeing with an asset such as Bitcoin.
With a stablecoin system that is dominated by the US dollar, firms will simply pile on more products on top of this. We will see staking, lending applications, and other derivatives emerge. This is another area where the CBDCs will be left behind.
There is a lot of talk about de-dollarization. This is something that the Neocons in the US set off by weaponizing the dollar.
USD stablecoins would help to counter this. In fact, we already see the overwhelming majority of stablecoin issued being tied to the dollar.
The legislation requires all stablecoins to be backed by highly liquid assets. This will be Treasuries, MBS, or repo contracts. All stablecoins will adhere to KYC and AML regulations.
What this means is that anyone with a smartphone can hold US dollar denominated assets. It will usurp most native currencies, especially in second and third world nations where instability is ever present.
One component that is not receiving a lot of attention at this point is the emergence of the "dark" stablecoin makret. I believe that synthetic and algorithmic stablecoins will also explode over the coming years. These are not legal under the legislation, meaning they cannot be listed on centralized exchanges.
That said, the rise of cross chain, decentralized exchanges will provide accessibility. This provides US dollar access without the government being able to weaponing the stablecoins (or other assets) as part of a geopolitical effort.
For many, using a USD stablecoin will be as easy as making a payment with one's native currency. Merchants will likely start to accept them, understanding the potential reach offered as compared to the alternative.
