A key provision in the recently passed GENIUS Act aims to curb the influence of tech conglomerates and major financial institutions in the U.S. stablecoin market, according to Circle Chief Strategy Officer Dante Disparte.
Key Takeaways:
The GENIUS Act includes a clause that blocks Big Tech and banks from dominating the stablecoin market. Both non-banks and traditional banks must establish separate entities to issue stablecoins. A ban on yield-bearing stablecoins may drive institutional investors toward DeFi platforms.Speaking on the Unchained podcast, Disparte referred to the measure as the “Libra clause,” a nod to Meta’s failed attempt to launch a global digital currency.
Under the clause, any non-bank entity seeking to issue a dollar-backed stablecoin must establish a standalone operation to navigate antitrust scrutiny and obtain clearance from a Treasury-led oversight committee with veto authority.
Banks Face Strict Rules on Stablecoin Issuance Under GENIUS Act
Traditional banks aren’t exempt from restrictions either. Lenders that issue stablecoins must do so through legally distinct subsidiaries.
These entities are prohibited from engaging in leverage, lending, or risk-bearing activity, creating a ringfenced structure that Disparte described as “more conservative” than deposit-token proposals floated by the likes of JPMorgan.
“It creates clear rules that I think in the end the biggest winners are the US consumers and market participants, and frankly, the dollar itself,” Disparte said.
The GENIUS Act, or the Guiding and Establishing National Innovation for US Stablecoins Act, passed the House with bipartisan backing, including votes from over 100 Democrats.
Disparte believes the legislation provides long-awaited regulatory clarity, granting crypto firms a path to legitimacy and giving the dollar a regulatory edge in the global digital currency race.
While firms with less than $10 billion in assets can still operate under state money-transmitter laws, any larger issuer must obtain a national trust-bank charter.
The bill also bans interest-bearing stablecoins and mandates rigorous asset disclosures. Issuers of unbacked tokens could face criminal penalties, effectively outlawing repeat scenarios like TerraUSD’s collapse.
Still, not everyone is celebrating. Critics argue that banning yield-bearing stablecoins could stifle innovation and push users toward international platforms. Disparte contends that yield should be left to decentralized finance (DeFi), once the foundational stablecoin layer is secure.
The yield ban could accelerate institutional interest in DeFi platforms, especially those on Ethereum, which already leads in total value locked.
Stablecoins Edge Closer to Mainstream Adoption
Stablecoins have emerged as one of crypto’s rare success stories, capturing the attention of corporations and regulators alike.
Recent reports that Amazon, Walmart, and other major companies are exploring stablecoin payments sent ripples through traditional finance, briefly pushing stablecoin transaction volumes ahead of Visa’s in 2024.
Frank Combay of Next Generation said regulatory clarity, especially Europe’s MiCA framework, has unlocked stablecoins’ growth potential by removing the biggest barrier: uncertainty.
He believes stablecoin ecosystems can reduce transaction costs by over 90% and are becoming increasingly attractive to both consumers and corporations.
Last week, Ripple CEO Brad Garlinghouse said the stablecoin sector is poised for explosive growth, projecting the market could balloon from its current $250 billion capitalization to as much as $2 trillion in the near future.
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