On Friday, US President Donald Trump signed a landmark crypto bill into law aimed at establishing a regulatory framework for stablecoins. The legislation, known as the GENIUS Act, passed with a significant majority of 308 to 122, garnering support from nearly half of the Democratic representatives and a majority of Republican lawmakers.
GENIUS Act Mandates Stablecoin Backing
Under the provisions of the GENIUS Act, stablecoins must be backed by liquid assets, such as US dollars and short-term Treasury bills. Additionally, issuers are required to publicly disclose the composition of their reserves on a monthly basis.
Proponents of the law argue that these regulations will enhance the credibility of stablecoins, making financial institutions, retailers, and consumers more inclined to utilize them for instant fund transfers.
Notably, Reuters reported that the stablecoin market, currently valued at over $260 billion according to CoinGecko, could potentially expand to $2 trillion by 2028, as estimated by Standard Chartered Bank.
This growth is attributed to the increased legitimacy and regulatory clarity provided by the new law, following a sustained lobbying effort from the crypto sector, which contributed more than $245 million to pro-crypto candidates, including Trump, during the last election cycle.
JPMorgan’s Forecast
While the law signifies a step forward for the cryptocurrency industry, it has faced criticism from some Democrats and skeptics. They argue that the legislation should have included measures to prevent large tech companies from issuing their own stablecoins, which could further consolidate their market power.
Additionally, advocates for stronger anti-money laundering (AML) protections and restrictions on foreign stablecoin issuers have raised concerns about the potential risks associated with the new framework.
The passage of the GENIUS Act may also influence the demand for US Treasury bills, as stablecoin issuers will need to purchase more of these government securities to back their assets.
Some analysts, including those from JPMorgan, predict that stablecoin issuers could emerge as significant players in the Treasury market, potentially becoming the third-largest buyers of T-bills in the coming years.
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