President Trump on Friday was signing the Genius Act the initial significant national legislation regulating digital currencies.
The legislation sets national rules for "stablecoins," considered a safer form of digital currency due to their value being tied to specific assets, such as the US dollar.
The Smart Move Law was approved in the House on Thursday with a voting result of 308-122 following its earlier endorsement. in the Senate Last month, it passed with wide bipartisan backing. The legislation is part of an ongoing effort by Republican legislators and President Trump to back the cryptocurrency industry and reduce regulatory constraints on this developing field.
For the first time ever, Congress has approved bi-partisan legislation regarding digital assets in both the Senate and the House. The Genius Act represents a significant achievement in maintaining America's position at the forefront of payment innovations, all while safeguarding consumers and enhancing national security," stated Senator Tim Scott from South Carolina, one of the bill's sponsors, in a release issued on Thursday after the measure was endorsed by Congress.
The initiative known as The Genius Act, backed by Republican Senator Bill Hagerty, includes two Democratic supporters—Senator Kirsten Gillibrand from New York and Senator Angela Alsobrooks from Maryland—and two Republican backers—South Carolina’s Senator Tim Scott and Wyoming’s Senator Cynthia Lummis.
Here's what you should understand about stablecoins and how the Genius Act might influence their application.
What is stablecoin?
Digital currencies like Bitcoin and Ethereum experience significant fluctuations in price, which can be risky for those who invest in them. Stablecoins seek to minimize these dangers by linking their worth to a more stable financial instrument, typically the U.S. dollar.
In an latest conversation with CBS News' Caitlin Huey-Burns Dante Disparte, the chief strategy officer at fintech firm Circle, referred to stablecoins as "digital dollars." According to him, the term suggests that these coins are designed to be more stable and less hazardous compared to other digital assets, thus serving as a preferable means of transaction for banking processes and various financial applications.
Circle is one of the major issuers of stablecoins and supported the enactment of the Genius Act.
"Ultimately, it's about having the ability to transfer funds beyond regular bank operating times and sending money in the same manner we use WhatsApp or other message apps," Disparte stated.
According to Disparte, approximately 90% of stablecoins are tied to the US dollar. These digital currencies are kept and traded on the blockchain, which is the transparent record-keeping system that supports other cryptocurrencies.
What actions will the Genius Act take?
Supported by cryptocurrency supporters, the Genius Act (an acronym for Guiding and Establishing National Innovation for U.S. Stablecoins) created guidelines and safeguards to protect consumers related to stablecoins.
The legislation also introduces a legal classification for stablecoins and defines specific criteria for which digital currencies can be labeled as stablecoins.
Thanks to the passage of the Genius Act, banks, nonbank entities, and credit unions can now enter the market by launching their own stablecoins.
In addition to being less unstable compared to other digital currencies, stablecoins enable quicker and cheaper financial transfers, according to advocates of the technology. Prior to the Senate voting on the Genius Act in June, Senator Bill Hagerty from Tennessee, who introduced the bill, said Stablecoins may enable businesses and individuals to complete transactions "almost instantly," instead of requiring several weeks.
Even though they are seen as less risky compared to other cryptocurrencies, stablecoins still carry certain dangers. A major risk is that the digital currency might become "unlinked" from its backing asset if the asset's value or availability fluctuates. This could lead to losses for traders, or broader financial system issues such as bankruptcy and lack of funds. according to S&P Global Ratings.
In 2023, for example, the collapse of American banks The collapse of Silicon Valley Bank, Signature Bank, and Silvergate Bank led to two forms of stablecoins — USDC and DAI — to depeg.
Stablecoins are also exposed to "market volatility, market trust and usage, technological risks, demand and supply dynamics, and market liquidity," as noted by S&P Global.
Is cryptocurrency gaining traction within the finance industry?
With the Genius Act pending approval from Congress, several of the country's biggest banks were beginning to explore ways to incorporate stablecoins into their operations amid increasing pressure from financial technology companies such as Circle.
On Tuesday during the company’s earnings conference call, Citigroup Chief Executive Officer Jane Fraser mentioned that the bank is exploring the creation of its very own type of cryptocurrency. As the third-biggest U.S. bank based on total assets, Citigroup is actively working on enhancing its digital currency expertise as part of efforts to boost income and draw in customers, according to her statement.
"We are actively keeping track of changes in the laws and regulations related to cryptocurrency issuance and assessing ways to effectively meet our clients' requirements using our current 24/7 offerings such as [Citi Token Services], along with considering possibilities for launching our own outside token or coin and collaborating with established service providers," said Biswarup Chatterjee, global head of partnerships & innovation within Citi's Services division, in a statement to CBS MoneyWatch.
The biggest U.S. bank, JPMorgan Chase, intends to adopt stablecoins, as stated by CEO Jamie Dimon during an analyst conference call on Tuesday.
In addition to the banking sector, firms such as Walmart and Amazon are also looking into the possibility of launching their own stablecoins, according to Sam Mcingenvalle, who leads product development at blockchain firm Optimism, in an email sent to CBS MoneyWatch on Tuesday.
"Should new stablecoin regulations be enacted, we anticipate an even greater surge," he stated.
What is Trump's position?
The Congress' endorsement of the Genius Act corresponds with Mr. Trump's commitment in March to position the U.S. as the "global hub for cryptocurrency"
Last year, at a Bitcoin convention in Nashville, Tennessee, Mr. Trump also said It would be his administration's approach to "retain 100% of all the bitcoin the U.S. government presently owns or obtains going forward."
Mr. Trump has undertaken additional steps indicating his fascination with digital currency. In January, just prior to assuming power, he and his wife Melania Trump introduced their own meme coins a cryptocurrency known for extreme volatility, where its worth is based on internet fame.
The president on Tuesdy posted His endorsement of the Genius Act on Truth Social.
"Genius Act will take our great nation light-years ahead of China, Europe, and everyone else, who are constantly striving to keep up, yet they simply cannot manage it," Mr. Trump stated.
Bitcoin's value increased by 1.40% on Thursday, reaching $120,584.80; Ethereum's cost went up 3.41% to $3,486.86.
Coinbase, the second biggest cryptocurrency trading platform globally, saw its stock increase by 3.2% on Thursday, ending the day at $410.75.