The impact of the "GENIUS Act" on the stablecoin market after its passage

1. The stablecoin market will usher in compliance and institutional development.

The "GENIUS Act" establishes a federal regulatory framework for the issuance and circulation of stablecoins, requiring that all payment stablecoins must be issued by licensed banks, credit unions, or non-bank institutions, and be fully backed 1:1 by cash, short-term U.S. Treasury securities, and other highly liquid assets, along with monthly transparency reports and annual audits.

This initiative significantly enhances the security and transparency of stablecoins, boosts the confidence of consumers and institutional investors, and is expected to attract more traditional financial institutions and large enterprises to participate in the stablecoin market, driving market scale expansion.

2. The demand for the US dollar and US Treasury bonds has surged, reinforcing the global dominance of the US dollar.

The bill requires compliant stablecoins to use US dollars or US Treasury bonds as their primary reserve assets, meaning that for every dollar of stablecoin issued, an equivalent dollar asset is locked.

With the growth of stablecoin circulation, it is expected to bring up to $2 trillion in new demand for the U.S. Treasury market, becoming an important new buyer of U.S. Treasuries, especially significant in the context of traditional sovereign buyers reducing their holdings of U.S. Treasuries.

By promoting the global circulation of the US dollar stablecoin, the United States is able to continuously export dollars in a digital manner, reinforcing its status as the global reserve currency.

3. The competition among issuing institutions is intensifying, leading to a survival of the fittest in the industry.

Strict reserve, transparency, and compliance requirements will eliminate issuers that fail to meet standards, driving the survival of the fittest in the industry.

Licensed compliant issuers (such as USDC, USDT, etc.) are expected to gain more market share, while the new regulations also open up space for innovative financial products and payment scenarios, promoting competition and innovation in the payment sector.

4. Offshore stablecoin issuers are restricted, and the discourse power of digital currency returns to the United States.

The bill requires foreign issuers to comply with the same regulatory standards as those in the United States, otherwise they will be prohibited from providing services on U.S. trading platforms, effectively preventing non-U.S. entities from "diverting" the dominance of the dollar digital currency.

5. Strengthening Consumer Protection and Anti-Money Laundering Mechanisms

The bill clarifies bankruptcy priority repayment, anti-money laundering and anti-terrorism compliance requirements, enhancing user asset security and market compliance levels.

6. Potential Challenges and Controversies

Although the bill helps to regulate the industry, some critics believe that the regulatory standards are still not strict enough, which may make it difficult to completely curb illegal trading or adequately protect consumers.

Summary

The passage of the "GENIUS Act" will promote the stablecoin market from "barbaric growth" towards Compliance, institutionalization, and globalization, strengthen the international status of the US dollar and US Treasury bonds, reshape the global digital financial landscape, and force other global economies to accelerate their digital currency regulatory measures.