Never underestimate the significance of the U.S. stablecoin "Genius Act."

Author: 0xTodd

If the U.S. stablecoin bill, the "GENIUS Act," passes smoothly, its significance will be tremendous, and I even think it could rank among the top five in Crypto history.

Although abbreviated as the GENIUS Act, which translates directly to the "Genius Act," it actually stands for Guiding and Establishing National Innovation for U.S. Stablecoins, which can be translated as "Guiding and Establishing National Innovation for U.S. Stablecoins."

The proposal is lengthy, so here are a few key points summarized for you:

1. Mandatory 1:1 Fully Backed Assets: This includes cash, bank demand deposits, and short-term U.S. Treasury securities. Additionally, misappropriation and re-pledging are strictly prohibited.

2. High-Frequency Information Disclosure: Reserve reports must be published at least once a month, with external audits introduced.

3. Issuance of Licenses: Once the circulating market value of an issuer's stablecoin exceeds $10 billion, they must transition to a federal regulatory framework within a specified timeframe, adopting banking-level supervision.

4. Introduction of Custodianship: The custodians of stablecoins and their reserve assets must be regulated qualified financial institutions.

5. Clear Definition as a Payment Medium: The bill explicitly defines stablecoins as a new type of payment medium, primarily governed by the banking regulatory framework, rather than being constrained by securities or commodities regulations.

6. Regulating Existing Stablecoins: There will be a maximum 18-month grace period after the bill takes effect, aimed at urging existing stablecoin issuers (such as USDT, USDC, etc.) to obtain licenses or comply with regulations promptly.

Now that the main points are covered, let’s discuss the significance of this matter with excitement.

For many years, when asked what applications the Crypto industry has developed over the past 16 years, the answer was often vague.

Now, you can confidently tell others—stablecoins.

First, Clearing Concerns is a Prerequisite

Some people have held opposing views, as the past impression of stablecoins was that they were—an opaque black box. Every few months, there would be FUD, whether it was Tether's assets being frozen or Circle having significant holes in its finances.

In fact, if you think about it, Tether easily earns billions of dollars a year just from the interest on those underlying Treasury bonds. Circle, slightly less, still made $1.7 billion in profit last year.

They are making money while standing still; from a motivational standpoint, they have no malicious intent and are, in fact, the most eager to comply.

Now, this opaque black box will turn into a transparent white box.

Previously, the only criticism was that Tether's funds might be frozen by the U.S., but now they will be placed directly into compliant custodial institutions in the U.S., with high-frequency information disclosure, allowing for peace of mind.

[No need to worry about running away] is a huge advantage—especially understood by all Crypto enthusiasts.

Second, Mastering Standards is Important

Stablecoins were once on the verge of being overshadowed by CBDCs. In any country, if there were to be a central bank digital currency, it would most likely not be built on a blockchain, at best on some internal consortium chain of the central bank, which honestly has no real significance.

When CBDCs were at their peak, it was the most dangerous time for stablecoins.

If CBDCs had succeeded back then, stablecoins would have been pushed into dark corners, and blockchain would have played a minimal role.

The remaining half-alive stablecoins would even have to learn the standards of central bank digital currencies, losing the narrative power of standards entirely.

Now, stablecoins have won (or are about to).

People will instead have to learn the [Blockchain + Token] standard.

Currently, many blockchains have applications that are not particularly meaningful, except for stablecoin transfers. For example, with Aptos, the only scenario I use it for is transferring between Binance and OKX.

Now that stablecoins will be legislated, what does this mean?

That's right, blockchain will become the only standard.

In the future, every stablecoin user will first need to learn how to use a wallet.

As a side note, I believe Ethereum's push for EIP-7702 is indeed somewhat forward-looking. While other chains are busy with memes, I appreciate that Ethereum continues to focus on account abstraction.

EIP-7702 is account abstraction, which can support, for example:

• Social account registration for wallets
• Using native currency to pay for GAS
• And more

This resolves the last mile for many new users to use stablecoins.

Third, Entering a New Era of Deposits

Moreover, once stablecoins receive legislative support, deposits and withdrawals will become much simpler.

Let’s imagine a scenario: previously, due to the gray nature of stablecoins, it was impossible, but after the bill passes, many traditional brokerages can support stablecoins themselves. U.S. stock investors' money could instantly turn into stablecoins and then be directly deposited into Coinbase in a second—believe it or not.

Now, let’s imagine another scenario: if the Genius Act smoothly passes through the House of Representatives, you will see:

Because the profits from this trade are too lucrative, existing stablecoin leaders and new traditional giants will frantically promote their stablecoin products.

An outsider, due to this promotion, will start using stablecoins. Then one day, they will realize that since the wallet account has already been created, how hard can it be to learn about Bitcoin inside?

Stablecoins are a massive Trojan horse; the moment you start using stablecoins, you unknowingly have one foot in the Crypto world.

Fourth, Finally

As a major reservoir for digesting U.S. debt, while stablecoins cannot directly convert debt, they at least provide liquidity to the secondary market for U.S. debt. These functions are quite important, and gradually, stablecoins will become a part of the U.S. debt market's body. Therefore, once the U.S. legislates this, after tasting this sweetness, it will be impossible to revert and cancel it.

Moreover, we are confident that stablecoins are indeed one of the great innovations in our industry; those who have used stablecoins find it hard to return to the traditional cash-banking system.

The bill cannot go back, and users cannot go back. In the future, concerns will soon be cleared, standards will be mastered, and the era of large deposits seems to be imminent.