The Three Major Impacts of the Genius Act on the Crypto Assets Industry

The U.S. Senate recently passed the "Guidance and Establishment of the American Stablecoin National Innovation Act" ( Genius Act ), which is the first comprehensive federal regulatory framework for stablecoins. The bill has now been submitted to the House of Representatives, where the House Financial Services Committee is preparing its own text for negotiation. If all goes well, the bill could become law before this fall, which would greatly reshape the Crypto Assets industry landscape.

The strict reserve requirements and national licensing system of the bill will determine which blockchains are favored, which projects become important, and which tokens are used, thereby influencing the flow of liquidity in the next wave. Let's delve into the three major impacts the bill would have on the industry if it becomes law.

1. Payment-type alternative tokens may disappear quickly

The Senate bill will create a new "Licensed Payment Stablecoin Issuer" license and require each Token to be backed 1:1 by cash, U.S. Treasury securities, or overnight repos (. Issuers with a circulation exceeding $50 billion will need to be audited annually. This contrasts sharply with the current system, which has almost no substantive assurance or reserve requirements.

This clear regulation comes at a time when stablecoins are becoming the main medium of exchange on the blockchain. In 2024, stablecoins account for about 60% of the value of Crypto Assets transfers, processing 1.5 million transactions daily, with most transaction amounts being below $10,000.

For everyday payments, it is clearly more practical to have a stablecoin Token that maintains a value of 1 dollar than a traditional payment alternative Token whose price may fluctuate by 5% in a short period. Once the federally licensed stablecoins can legally circulate across states, merchants that still accept volatile Tokens will find it difficult to justify the additional risk. In the coming years, the practicality and investment value of these alternative Tokens may significantly decline unless they can successfully transform.

Even if the Senate bill does not pass in its current form, the trend is already evident. Long-term incentives will clearly favor payment channels linked to the US dollar rather than payment-type alternative Tokens.

2. The new compliance rules may actually determine new winners

The new regulations will not only provide legitimacy for stablecoins; if the bill becomes law, it will ultimately guide these stablecoins to flow towards blockchains that can meet auditing and risk management requirements.

Ethereum currently hosts approximately $130.3 billion in stablecoins, far surpassing any competitors. Its mature decentralized finance )DeFi( ecosystem means that issuers can easily access lending pools, collateral lockups, and analytical tools. In addition, they can also assemble a set of regulatory compliance modules and best practices to attempt to meet regulatory requirements.

In contrast, the XRP ledger ) XRPL ( is positioned as a compliance-first tokenized currency platform, including stablecoins. In the past month, fully supported stablecoin tokens have been launched on the XRP ledger, each with built-in account freezing, blacklisting, and identity screening tools. These features align closely with the requirements of the Senate bill, which mandates that issuers maintain robust redemption and anti-money laundering controls.

The compliance system of Ethereum may cause issuers to violate this requirement, but it is currently difficult to determine how strict the regulatory requirements are in this regard. Nevertheless, if the bill becomes law in its current form, large issuers will need real-time verification and plug-and-play "Know Your Customer" ) KYC ( mechanisms to maintain general compliance. Ethereum offers flexibility, but the technical implementation is complex, whereas XRP provides a simplified platform and top-down control.

Currently, both of these blockchains seem to have advantages over chains that focus on privacy or speed, which may require expensive modifications to meet the same requirements.

3. Reserve rules may bring an influx of institutional funds to blockchain

As each dollar stablecoin must hold an equivalent cash-like asset reserve, this bill quietly links the liquidity of Crypto Assets to U.S. short-term debt. The stablecoin market has surpassed $251 billion. If institutions continue to develop along the current path, it could reach $500 billion by 2026. At this scale, stablecoin issuers will become one of the largest buyers of U.S. short-term government bonds, using the returns to support redemptions or customer rewards.

For blockchain, this connection has two aspects of significance. First, the demand for more reserves means that more corporate balance sheets will hold government bonds while also holding native Tokens to pay for network fees, thus driving organic demand for Tokens such as Ethereum and XRP. Second, interest income from stablecoins could fund incentives for aggressive users. If issuers return part of the government bond income to holders, using stablecoins instead of credit cards may become a rational choice for some investors, thereby accelerating on-chain payment volume and fee throughput.

If the House retains the reserve clause, investors should also expect increased currency sensitivity. If regulators adjust collateral eligibility or the Federal Reserve changes the supply of government bonds, the growth of stablecoins and the liquidity of Crypto Assets will fluctuate in sync. This is a notable risk, but it also indicates that digital assets are gradually integrating into mainstream capital markets rather than remaining independent from them.

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