The GENIUS Act (S. 1582), legislation that aims to provide regulatory clarity for stablecoins, is expected to head to a floor vote in the US Senate tomorrow. Last week, the bill was part of a cloture motion, which then limited debate, allowing it to move forward. Several amendments were also added to the language of the legislation.
While stablecoins cover a broad spectrum of digital assets tied to another asset or, perhaps, an algorithm, the bill aims to address the payments market. Effectively, the ability of firms to issue digital dollars, which are expected to be the future of digital payment rails, which are faster, more secure, and less costly.
While many Democrats have opposed the legislation, reports indicate that more Democrats are lining up to support the bill, as passage is almost guaranteed, making it pointless to fight the inevitability of improved payments.
The legislation requires that stablecoins are fully backed by reserves, including cash and treasuries, along with mandatory audits. Any interest generated by the holdings will accrue only to the issuer and not the holder of the stablecoins, and thus will not compete with money market funds.
Senator Elizabeth Warren, a Democrat member of the Senate Banking Committee, has been vocally opposed to the stablecoin bill. Earlier today, she referenced an article in WSJ.com that indicated large merchants, such as Walmart and Amazon, or big tech firms, are exploring the possibility of issuing their own digital currencies. She believes an amendment is needed to prevent this and stop “Elon Musk and Jeff Bezos” from tracking your purchases. Warren predicts that billionaires will need a bailout once it “inevitably blows up.”
A separate WSJ.com article expressed concern about the impact of stablecoins on banks, suggesting that stablecoins may be destabilizing.
Of course, the legislation enabling stablecoins may compel banks to enter this market.
A digital dollar may help prop up the dollar’s status as the world’s reserve currency. This would be beneficial for both the dollar and the country.
Any legislation approved in the Senate must also pass the House, so final details will be hashed out at a later date.