Stablecoins Take Flight...Bill Passes in U.S. Senate

Stablecoins Brought Under Financial Regulation

If More Investors Trust in Their Stability

U.S. Treasury Demand May Increase, Helping Stabilize Interest Rates

No Restrictions on Profits from Stablecoins for Trump’s Family

Potential for Conflicts of Interest

The so-called GENIUS (Guiding and Establishing National Innovation for U.S. Stablecoins) Act, a bill regulating stablecoins, passed the full session of the U.S. Senate on the 17th (local time). Expectations are that this will not only lay the institutional groundwork for stablecoins but also serve as an opportunity to enhance the value of Treasury bonds used as collateral for stablecoins.

Recognized as Legitimate Financial Instruments

Though the GENIUS Act was introduced by Republican Senator Bill Hagerty, some Democratic senators also joined as co-sponsors, making it a bipartisan bill. At the Senate session, the bill passed with 68 in favor and 30 against. It now moves to the House.

The GENIUS Act stands for 'Guiding and Establishing National Innovation for U.S. Stablecoins.' According to this bill, 100% reserve holdings are mandatory to issue stablecoins, and monthly financial audits are required. Compliance with anti-money laundering (AML) standards is also necessary.

While a regulatory bill, it also recognizes stablecoins as legitimate financial instruments under the law. This offers stablecoin investors greater confidence when investing.

Could Raise the Value of U.S. Treasury Bonds

The market is particularly noting that the bill could further raise the value of U.S. Treasury bonds. Stablecoins are typically backed by collateral, most often U.S. Treasuries. As demand for stablecoins increases, issuers’ purchases of Treasuries also grow. The Trump administration, in particular, has openly stated its intention to provide market liquidity by lowering Treasury yields.

Scott Besant, the U.S. Secretary of the Treasury, said at a Senate Budget Subcommittee on the 11th, "Legislation backing stablecoins with U.S. Treasuries will expand dollar usage globally via stablecoins," adding, "A market cap forecast of $2 trillion for stablecoins is very reasonable, and I think it could go much higher."

Trump Family Conflict of Interest Concerns

The bill prohibits members of Congress and their families from profiting from stablecoins, but it does not impose similar restrictions on the president and their family—a potentially contentious issue as the House takes up the bill. This omission may raise conflict-of-interest concerns, given the Trump family’s substantial cryptocurrency investments.

Donald Trump Jr., the president’s eldest son, and Eric Trump, his second son, founded the crypto platform World Liberty Financial (WLF) in September last year and issued the Trump meme coin. They also launched their own stablecoin, USD1.

Democratic Senator Elizabeth Warren (Massachusetts) criticized the bill, stating, "This bill creates a superhighway for Trump corruption."

Uncertainty Over Regulatory Oversight

The bill allows not only federally insured banks but also ordinary companies to issue stablecoins. Companies with less than $10 billion in issuance will be regulated by state governments, while those above that threshold will be under federal authority.

However, there are concerns about whether regulators can manage the potentially excessive number of stablecoins that may be issued. The New York Times criticized, "Regulators are already struggling to oversee insured banks like Silicon Valley Bank. Imagine the problems if hundreds or thousands of stablecoins are issued."

New York – Shin-Young Park, Correspondent nyusos@hankyung.com