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

Recently, the U.S. Senate passed the "Guidance and Establishment of the United States Stablecoin National Innovation Act," also known as the Genius Act. This is the first comprehensive federal regulatory framework for stablecoins, marking an important step in the regulation of Crypto Assets. The bill has now been submitted to the House of Representatives for review, and if passed smoothly, it may officially become law this fall.

The core content of this bill includes strict reserve requirements and a nationwide licensing system, which will have a profound impact on the Crypto Assets industry. It will not only reshape the industry landscape but also determine which blockchain technologies and projects will be favored, thereby affecting future funding flows. Let us explore the three major impacts that the industry will face if this bill ultimately becomes law.

1. Payment-type Crypto Assets may face elimination

The Genius Act will create a new "licensed payment stablecoin issuer" license and require each stablecoin to be backed 1:1 by cash, U.S. Treasury securities, or overnight repurchase agreements. Issuers with a circulation exceeding $50 billion will also be required to undergo an annual audit. This stands in stark contrast to the current situation, which has almost no substantive guarantees or reserve requirements.

Currently, stablecoins have become the main medium of transaction 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 less than 10,000 dollars. Compared to traditional Crypto Assets, which have significant price volatility, stablecoins that consistently maintain a value of 1 dollar are clearly more suitable for everyday payments.

Once stablecoins licensed in the United States can be legally circulated across states, merchants that continue to accept highly volatile Crypto Assets will find it difficult to justify the additional risks they are taking. In the coming years, the practicality and investment value of these traditional encryption coins may significantly decrease, unless they can successfully transform.

Even if the Senate bill does not pass in its current form, this trend is already evident. In the long term, the market will clearly favor payment channels linked to the US dollar rather than the more volatile crypto assets.

2. Compliance requirements may reshape the industry landscape

The new regulations will not only provide legal protection for stablecoins but will also effectively guide funds towards blockchain platforms that can meet auditing and risk management requirements.

Currently, a certain blockchain platform has custody of approximately 130.3 billion USD in stablecoins, far surpassing other competitors. Its mature decentralized financial ecosystem allows issuers to 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 meet regulatory requirements.

Another blockchain platform is positioning itself as a compliance-first tokenized currency platform, including stablecoins. The stablecoins launched on this platform are equipped with account freezing, blacklisting, and identity screening tools. These features align closely with the requirements of the Senate bill, which stipulates that issuers must maintain robust redemption and anti-money laundering controls.

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 remain compliant. Some platforms offer flexibility, but the technical implementation is complex, while others provide simplified platforms and top-down control.

Currently, these compliance-focused blockchain platforms seem to have advantages over those that prioritize privacy or speed, as the latter may require expensive renovations to meet the same standards.

3. Reserve rules may guide institutional funds into the blockchain field

Since each dollar stablecoin must hold cash-like asset reserves of equivalent value, this legislation effectively ties the liquidity of Crypto Assets to U.S. short-term debt.

The market size of stablecoins has exceeded $251 billion. If institutions continue to develop along the current path, it may reach $500 billion by 2026. At this scale, stablecoin issuers will become one of the major buyers of U.S. Treasury bills, using the returns to support redemptions or customer rewards.

For blockchain, this connection has two implications. First, the demand for more reserves means that more corporate balance sheets will hold government bonds while also holding native tokens to pay network fees, thereby driving organic demand for certain Crypto Assets.

Secondly, the interest income from stablecoins may provide funding for incentives for aggressive users. If issuers return part of the government bond yields to holders, using stablecoins instead of credit cards may become a rational choice for some investors, thereby accelerating on-chain payment volumes 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 the mainstream capital markets rather than existing independently. With the improvement of regulatory frameworks, the Crypto Assets industry will face new development opportunities and challenges.