Will GENIUS Act Reshape US$238bn Stablecoin Market?

After clearing a procedural hurdle in the House of Representatives by a 215-211 vote on 16 July, the GENIUS Act now heads to floor debate, having already secured bipartisan Senate approval in June. 

The legislation would establish the first comprehensive regulatory framework for stablecoins, requiring full backing by liquid assets and monthly reserve disclosures.

House Speaker Mike Johnson said Republicans are taking "decisive steps to deliver the full scope of President Trump's digital assets and cryptocurrency agenda". Johnson added: "I look forward to President Trump signing them into law."

Two additional measures advanced alongside the stablecoin bill: the Digital Asset Market Clarity Act, which delineates regulatory roles between the Securities Exchange Commission and Commodity Futures Trading Commission, and the Anti-CBDC Surveillance State Act, designed to block Federal Reserve development of a digital dollar.

Circle and Tether face new rivals

Circle's USDC and Tether's USDT currently control the stablecoin landscape in what Nic Puckrin, Crypto Analyst and Founder of The Coin Bureau, characterises as "a duopoly". The GENIUS Act's clear regulatory pathways could trigger an influx of new issuers, fundamentally altering market dynamics.

Major financial institutions including Bank of America, Amazon, and US Bank have reportedly begun exploring stablecoin launches, awaiting regulatory certainty. 

Puckrin anticipates banks will "rush into the market" once the framework is established, providing consumers with expanded choices beyond the current limited options.

The legislation mandates that stablecoins maintain full backing through liquid assets such as US dollars and short-term Treasury bills. Monthly reserve disclosures would become mandatory, addressing longstanding transparency concerns that have plagued the sector.

Senator Bill Hagerty, who introduced the bill, warned during June's Senate debate that regulatory inaction would push stablecoin innovation overseas. "We will also fall behind in global competitiveness," Hagerty stated, emphasising America's need to maintain its position in digital finance leadership.

Why Democrats cry corruption

Opposition to the crypto package remains substantial among Democratic lawmakers. Representatives Maxine Waters and Stephen Lynch organised what they termed "anti-crypto corruption week" to counter the Republican initiative.

Senator Jeff Merkley, who voted against the GENIUS Act in the Senate, questions the absence of corruption safeguards. 

"We need guardrails that ensure that government officials aren't openly asking people to buy their coins in order to increase their personal profit or their family's profit," Merkley states. "Where are those guardrails in this bill? They're completely, totally absent."

Critics argue the legislation undermines crypto's decentralised principles while potentially enabling regulatory favouritism towards specific stablecoins. Some express concern that allowing numerous entities to issue stablecoins could complicate enforcement of the proposed standards.

The vote's narrow margin - just four votes - reflects the partisan divide surrounding crypto regulation, with 210 Democrats and 13 Republicans initially opposing the package before Wednesday's successful advancement.

Emerging markets drive adoption

Stablecoins have gained traction in emerging markets across Latin America and Sub-Saharan Africa, where they serve as hedges against monetary instability and facilitate cross-border transactions. The technology's applications continue expanding as adoption accelerates.

With global stablecoin market capitalisation sitting below US$260bn against the US$40tn cross-border payments market, significant growth potential remains untapped. Companies including Stripe, PayPal, and Walmart are building infrastructure to support stablecoin integration.

Osama Bari, CTO of D24 Fintech Group, views the GENIUS Act as a watershed moment. "By delivering the clarity institutions need, it paves the way for major players, like banks and retailers, to enter the space with confidence," Bari states.

International developments mirror this trend. France's Societe Generale is launching its own publicly tradable stablecoin, whilst governments from China to the UK advance central bank digital currencies as state-backed alternatives to private stablecoins.

Does Visa and Mastercard disruption loom?

The ripple effects of stablecoin regulation extend beyond crypto into traditional retail and payments. As digital currencies become viable dollar alternatives, merchants and financial institutions face pressure to integrate stablecoin payment options.

Puckrin anticipates that payment networks including Visa and Mastercard will eventually support stablecoins, potentially reducing transaction fees. The Credit Card Competition Act, which sought to challenge the Visa-Mastercard duopoly, was considered for inclusion in the GENIUS Act but ultimately excluded to avoid jeopardising passage.

Bezalel Eithan Raviv, CEO of blockchain security firm Lionsgate Network, acknowledges the bill's imperfections whilst supporting its passage. "The general outlook is that [the bill] will do better than anything that is currently happening," Raviv states.

Bari emphasises stablecoins' advantages over traditional finance: 24/7 settlement, reduced cross-border costs, and stability in volatile regions. 

"The GENIUS Act could do for stablecoins what the early internet regulations did for e-commerce, unlocking institutional confidence and driving mainstream adoption," Bari concludes.