This week, the blockchain and crypto industry takes another step towards mainstream adoption. The GENIUS Act, or the Generating Entrepreneurship and Innovation for the Nation through Unified and Improved State Regulations Act, has been passed and signed by US President Donald Trump. This first-of-its-kind crypto legislation outlines the framework for stablecoins. While this move has been lauded by most in the crypto industry, other analysts say that the bill hasn't completely addressed the risks.

The US White House has formally signed and approved the GENIUS Act, regulatory framework for payment stablecoins. It's one of the three crypto bills hat have been the subject of intense attention and debate, but received President Trump's support, and ultimately his signature. The market immediately responded, pushing Bitcoin, Ether, and XRP to all-time highs outpacing traditional markets like gold and the Nasdaq Composite index.

According to MarketWatch, Bitcoin's price peaked at $123,000 a days before the signing of the measure, before retracing a bit to around $117k post-signing. Ripple's XRP had the best performance, and many considered it as the direct beneficiary of the new regulatory framework. After trading sideways between $2 and $2.50 for months, XRP picked up the pace, and surged to a record high of $3.66, before retracing to the $3.40 to $3.50 levels, post-signing.

While the price rush was instant thanks to the hype and enthusiasm, the "real effects" of the regulation will not be immediate. Immediately, analysts and market commentators have found themselves at opposite ends of the conversation- some say that it's future of stablecoins and crypto, and others offer warnings. Regardless, majority say that the Act is a push towards crypto's mainstreaming.

But First, a Look at Stablecoins

To appreciate the Act, one must go back to stablecoins which are the primary focus of the new rules and framework. A stablecoin is a type of digital asset that's designed to maintain a stable value, often pegged to real-money assets, like the US Dollar, EUR or even gold.

Unlike Bitcoin and other popular meme coins, stablecoins are not more stable, price-wise, while retaining the defining characteristics of crypto like speed, convenience, and transparency. Hence, stablecoins are increasingly used for payments, remittances, trading, and even decentralized finance (DeFi).

Then, there are different types of stablecoins, often based on how they hold value. Currently, there are three categories: the fiat-collaterized, the crypto-collaterized, and algorithmic. The most popular category is the fiat-collaterizsed, such as the USDT and USDC that's backed 1:1 by fiat reserves held in a bank. Then, there's the crypto-collaterized, such as DAI, that is backed by other cryptocurrencies. Finally, we have the algorithmic where price is connected to algorithms and supply adjustment.

Here's What the GENIUS Act Says About the Stablecoins, and its Regulations

According to a bill summary uploaded by the US Congress, only the permitted issuers may issue payment stablecoins that can be used by US persons, subject to specific safe harbors and exceptions.

The approved framework specifies the requirements expected from potential issuers, as explained below:

1. An issuer must be a subsidiary of an insured depository institution, a state-qualified payment stablecoin issuer, or a federal-qualified nonbank payment stablecoin issuer;
2. Issuer must be regulated by state or federal regulator. The Act allows the issuer to pick between a state or federal regulator; however, state regulation only applies to issuance of less than $10 billion;
3. The issuer must maintain reserves backing the digital asset, on a 1:1 basis, using USD or other liquid assets.
4. Issuers are also mandated under the law to publicly disclose the redemption policy, and publish the reserves' details.

The law also specificies a few more requirements, particularly on reusing reserves, providing safekeeping services, and the supervisory, examination, and enforcement authority over federal-qualified issuers.

Also, foreign companies and issuers of stablecoins may be allowed to offer and sell stablecoins using digital asset providers, provided they comply with the requirements as determined by the Department of Treasury, under comparable foreign regulations.

Finally, the law clearly states that payment stablecoins aren't securities, under securities law. However, permitted stablecoin issuers are covered by the Bank Secrecy Act under anti-money laundering laws.

So, What Does This Mean to Stablecoins?

The GEINUS Act, recently signed by President Trump, includes plenty of provisions that clarify and sypport stablecoins' regulations at the state level, which is a clear boost to the crypto community. Here's how stablecoins and the broader crypto community benefit from this latest development:

1. Provides legal clarity of issuers. The GENIUS Act provides state-level guidelines on now issuers can issue and manage stablecoins legally, without the fear of backlash.
2. Unified state framework. Instead of states designing and implementing their respective rules on stablecoins, the Act simplifies through cohesive state laws, promoting the operations of stablecoin projects.
3. Offers consumer protection. The Act now sets up protection for stablecoin users and investors, through the integration of reserve audits, transparency, and redemption rights. The new framework ensure that each stablecoin is supported by an equal fiat amount, and that it's backed by a reserve.
4. Boosts institutional adoption. The Act's passage serves as a big boost not just to stablecoins, but also to the broader crypto industry. Since the government now provides a clearer framework to operate, it send signals to interested stakeholders wanting to take part in the industry. Thanks to this regulatory clarity, institutions and financial companies can now integrate stablecoins without worrying about regulatory gray areas.
5. Notable boost on Ripple's XRP and other assets. The passage of the GENIUS Act indirectly benefits XRP, one of the more popular digital assets directly related to payments. And as we've noted, XRP surged in price and hit an all-time higher after the publication of the news.

Some Analysts Raise a Few Concerns

Firstly, there's the Trump connection to the stablecoin industry. It can be remembered that a Trump-affiliated company issued issued a stablecoin in Marh. Although this company, the World Liberty Financial, indicated that no family member is a director still, it's majority-owned by the Trump Organization.

While World Liberty's stablecoin hasn't gone mainstream (yet), it has been announced that it received $2 billion investment backing. And according to a Reuters report, the Trump family has already made $500 million from this stablecoin project

Beyond the conflict of interest, the Act also raises the possibility of the proliferation of privately-issued stablecoins, forcing individuals to use several coins in a shop or online store. Although this can be addressed by building a centralizsed app, it challenges users to create their crypto wallets which can be a security risk for many.

The Act also leads to a scenario where issuers become "their own banks". One commentator says that this new framework allowers issuers to skirt regular banking protections and basically run their show, often to problematic outcomes.

Finally, some are saying that the new Act fails to protect the economy and consumers from possible risks. Consumer Reports have raised the prospect of the framework failing to protect users. Delicia Hand, the senior director for digital marketplace at Consumer Reports, stated that users are now expose to more risks, leading to possible insolvenices and federal bailouts.

Owen

I write about Bitcoin and cryptos, the latest news on AI and tech, and follow the latest trends in online gambling, including provably fair games. Educator by profession, with a passion for writing.