Bloomberg News has reported that on 4 February, Senator Bill Hagerty will introduce legislation to set up a framework to regulate stablecoins.
The bill — dubbed the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act — will outline provisions for issuing stablecoin payments and mandate that they be backed by US currency, Federal Reserve notes, Treasury bills, or other assets.
A monthly report on reserves will be required by the stablecoin bill. Criminal penalties would be imposed for false reporting.
Regulators have scrutinized the quality of assets backing stablecoins, including Tether’s USDT token, amid concerns over liquidity and the ability to meet mass redemption requests under market stress.
In order to achieve this, the bill is intended to bring clarity to stablecoins. These are tokens tied to the US Dollar and real world assets. Supporters argue that the federal oversight will enhance credibility, and help to promote wider adoption of stablecoins in the financial system.
Hagerty is quoted as saying:
“My legislation establishes a safe and pro-growth regulatory framework that will unleash innovation and advance the President’s mission to make America the world capital of crypto.”
Kirsten Gillibrand is one of the co-sponsors. Tim Scott and Cynthia Lummis also support this bill. The bill is a continuation of Republican efforts to establish guidelines for crypto, an industry that has been prioritized by President Donald Trump.
Office of the Comptroller of the Currency (OCC), an independent bureau of the Treasury Department would supervise and regulate nonbank stablecoin issues.
Propelling stablecoin growth
Trump is committed to encouraging the cryptocurrency industry through reducing regulatory obstacles and by appointing regulators who are crypto-friendly.
On the first day of his tenure, he The Executive Order was signed Create a Crypto Working Group, stop the development of a US Central Bank Digital Currency, assess, and possibly establish, a digital assets stockpile.
While the order created a group of experts to develop a framework for digital assets and propose regulatory changes, substantive policy modifications would need congressional approval. Both the major parties expressed an interest to address stablecoin regulatory issues.
The legal framework may be able to spur the growth of the US stablecoins market, which has stagnated. According to Chainalysis’ “2024 Geography of Crypto Report,” Stablecoin volumes are shifting from US platforms. This is likely because of the obstacles imposed by the slow progress in regulatory reforms for stablecoins, digital assets, and other digital currencies.
By 2023 the amount of stablecoins flowing to US crypto-exchanges will be nearly half, and then fall below 40% by June 2024. Reports suggest that stablecoin usage is on the rise globally, and has surpassed US dollars.
As of February 3rd, CryptoSlate’s data shows that the size of the stablecoin was over $215 Billion and there were more than $34 Trillion in annual aggregated transfers.
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