tl;dr
Senator Bill Hagerty is introducing legislation, the GENIUS Act, to regulate stablecoins, requiring them to be backed by US currency or other assets, and mandating monthly audited reports on reserves. The bill aims to provide regulatory clarity and oversight for stablecoins, with bipartisan support....
Senator Bill Hagerty is set to introduce legislation for a stablecoin regulatory framework on Feb. 4, aiming to enhance credibility and promote broader adoption of stablecoins within the financial system. Co-sponsored by Senators Kirsten Gillibrand, Tim Scott, and Cynthia Lummis, the bill seeks to establish a safe and pro-growth regulatory framework for stablecoins, requiring them to be backed by US currency or other assets and regulated by the Office of the Comptroller of the Currency. The proposed GENIUS Act also mandates monthly audited reports on reserves to provide regulatory clarity and oversight for stablecoins, with bipartisan support.
The bill, dubbed the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act, outlines provisions for issuing stablecoin payments, requiring them to be backed by US currency, Federal Reserve notes, Treasury bills, or other assets. It also mandates stablecoin issuers to submit monthly audited reports on their reserves, with false reporting resulting in criminal penalties. This move comes amidst regulatory scrutiny of stablecoins' asset quality, focusing on concerns over liquidity and meeting mass redemption requests under market stress.
Proponents argue that federal oversight would enhance credibility and promote broader adoption of stablecoins within the financial system. Senator Hagerty stated, "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."
President Donald Trump has committed to fostering the crypto industry, emphasizing the proposed legislation's potential to spur growth in the US stablecoin market. The Office of the Comptroller of the Currency would regulate and supervise nonbank stablecoin issuers, reflecting a continued effort among Republican lawmakers to create guidelines for the crypto industry.
Trump's commitment to reducing regulatory barriers and appointing crypto-friendly regulators has been evident since his early days in office. His executive order to create a crypto working group, halt developments regarding a US central bank digital currency, and assess and potentially establish a digital asset stockpile reinforces this commitment. However, any substantive policy changes would require congressional approval, and both major parties have signaled an interest in addressing stablecoin regulation.
Addressing these regulatory issues could spur growth in the US stablecoin market, as stablecoin volume has been shifting away from US platforms due to barriers imposed by sputtering regulatory progress on stablecoins and digital assets. Chainalysis' "2024 Geography of Crypto Report" suggests that global stablecoin adoption is outpacing US dollar usage, underscoring the need for clear regulatory frameworks. As of Feb. 3, the stablecoin market has surpassed $215 billion in size and over $34 trillion in yearly aggregated transfer volume, reflecting the significance of stablecoins within the broader financial landscape.