GENIUS Act Shifts Stablecoin Regulation Landscape

GENIUS Act Mandates 1:1 USD Backing for Stablecoins

The GENIUS Act, signed by Donald Trump, introduces significant regulatory changes for stablecoins. It establishes power under the US Treasury and Federal Reserve, focusing on transparency and compliance.

PayPal, a major player in USD stablecoins, stands out as regulatory compliance becomes central. The act requires stablecoins to be backed 1:1 by US dollars or Treasuries, prompting new challenges for issuers.

President Donald J. Trump, President of the United States: “Permitted issuers must maintain reserves backing the stablecoin on a one-to-one basis using U.S. currency or other similarly liquid assets, as specified. Permitted issuers must also publicly disclose their redemption policy and publish monthly the details of their reserves.” Congress.gov S.1582

PayPal Benefits from Revised Stablecoin Regulations

The law alters stablecoin issuance, limiting it to approved banks or nonbanks. PayPal’s elevated role is seen positively, as it aligns with regulatory changes. The community anticipates a shift toward regulated stablecoins.

Some large-cap tokens may face challenges under new regulations. Historical trends show non-compliant stablecoins losing liquidity, akin to Europe’s MiCA standards. The government aims to drive Treasury demand through these requirements.

US Stablecoin Rules Align with Global Benchmarks

Previous US proposals like the Stablecoin TRUST Act echo the GENIUS Act’s goals but did not pass. International models, such as Singapore’s stablecoin licensing, also set compliance benchmarks. US standards align with these global efforts.

Based on data, experts suggest a consolidation around fully regulated stablecoin assets. Kanalcoin emphasizes that issuers like PayPal might gain competitive advantages. Historical analysis indicates a likelihood of compliance-driven markets.