Stablecoin is about to receive legal recognition from US regulators

Stablecoins have long been regarded as a crucial pillar of on-chain finance, and they are now about to receive legal recognition from U.S. regulators. Some analysts believe this is a significant turning point for the cryptocurrency industry and may become the first crypto product with mainstream utility and clear regulation.

Summary of New Legislation

The "Guidance and Establishment of the American Stablecoin National Innovation Act" ( GENIUS Act ) may become the most influential legislation in the history of cryptocurrency. This bipartisan bill establishes the first federal regulatory framework for payment stablecoins, aimed at injecting confidence, clarity, and legitimacy into the over $260 billion stablecoin market.

Key Points of the Bill

• Asset Backing: The issuer must fully back the stablecoin with high-quality liquid assets on a 1:1 basis, including US dollar cash, insured bank deposits, money market funds, or short-term government bonds.
• Payment Only: Issuers must not pay interest to stablecoin holders, ensuring that stablecoins serve only as digital cash equivalents.
• Bankruptcy Protection: In the event of the issuer's bankruptcy, stablecoin holders have a preferential claim on the reserve assets.
• Transparency and Audit: Issuers are required to disclose reserve status monthly and undergo regular audits.
• Anti-Money Laundering Compliance: Requires stringent anti-money laundering and customer identification measures.
• Regulatory Framework: Authorizes federal and state regulatory agencies to supervise issuers, with the U.S. Department of the Treasury as the primary regulatory agency.
• Issuer Qualification: Banks, fintech companies, and even large retailers can issue stablecoins, but publicly traded companies primarily engaged in technology, social media, or e-commerce are prohibited from issuing.

Impact on Major Market Participants

USDC and USDT

Although the new bill has strict requirements for stablecoin reserve assets, this is not a fatal blow to Tether(USDT). Tether has various ways to achieve compliance and is expected to take appropriate measures. In the future, competition in the stablecoin market may be more reflected in the services surrounding stablecoins, such as payroll payments and faster payment speeds.

In emerging markets, there is a huge demand for stablecoins as a tool to combat inflation. Tether dominates these markets and is expected to maintain its advantage.

fintech company

In the coming years, it is expected that every major fintech company will launch its own stablecoin. These companies have large user bases, global infrastructure, and strong balance sheets, and stablecoins can provide them with new sources of revenue and business opportunities.

banking industry

Traditional banks are facing challenges. A lack of innovation and motivation to issue stablecoins may cause some banks to lose competitiveness in the coming years. However, adaptable banks and fintech companies are expected to thrive in the new environment.

payment network

Stablecoins pose a significant challenge to traditional payment networks such as Visa/MasterCard. Stablecoins support instant settlement and global peer-to-peer transactions at a low cost, potentially bypassing traditional card payment rails. Payment giants need to adjust their strategies, transforming from mere "value transfer" networks to providers of "trust and tools."

Impact on the Dominance of the US Dollar

Stablecoins may become an important tool in supporting the global position of the US dollar. They expand the global network effect of the dollar and diversify the holding base of US debt. In particular, offshore-issued stablecoins can provide financial services to the unbanked population while bringing in new buyers of US debt.

Investment Advice

• ETH and SOL are considered the safest long-term stablecoin-related investment options.
• Stocks of certain cryptocurrency exchanges can be an alternative option, but they are currently overvalued.
• High-risk, high-reward options include some emerging stablecoin-related projects.

Overall, the stablecoin market is rapidly developing, with an upward trend in supply, transaction speed, and price volatility. The changes in this field are worth close attention.