GENIUS Act Update

With this week's indictment of Crypto Bro Iurii Gugnin on half-billion-dollar money laundering, sanctions and export control charges, along with the release of revised and greatly loosened enforcement guidelines for the Foreign Corrupt Practices Act, we wanted to check in on the progress Congressional sponsors have made with the Guiding and Establishing National Innovation for U.S. Stablecoins (GENIUS) Act (S. 1582), which aims to establish the first federal regulatory framework for payment stablecoins.

The legislation, sponsored by Senators Bill Hagerty (R‑TN), Tim Scott (R‑SC),  Kirsten Gillibrand (D‑NY), Cynthia Lummis (R‑WY), and Angela Alsobrooks (D‑MD) faces a vote on the Senate floor thisa week.

• Defining permitted issuers—either subsidiaries of insured depository institutions, federally qualified non-bank payment-stablecoin issuers, or state-qualified issuers—with federal or state oversight (if issuance is ≤ $10 billion) .
•  Requiring 1:1 reserve backing in U.S. dollars or similarly liquid assets, public monthly disclosures, and restrictions on risky reserve assets, with additional safeguards including annual audits for $50 billion-class issuers .
•  Clarifying that payment stablecoins under the Act are not securities, though issuers remain subject to Bank Secrecy Act AML rules .
•  Introducing a Stablecoin Certification Review Committee to determine equivalency of state regulatory regimes for issuers under federal supervision .
• Permitting foreign stablecoin issuers only if they comply with comparable regulations or are certified by Treasury 

“The GENIUS Act skyrockets the United States with a digital payment framework with the fastest rails possible… Customers will be protected, demand for U.S. Treasuries will balloon… and innovation in the digital asset space will thrive in the United States going forward,” according to Sen. Hagerty.

Sen. Elizabeth Warren (D-MA) has led the opposition, reflecting concerns over insufficient consumer protections and possible exploitation by high-profile issuers.  

The bill "“runs a substantial risk of blowing up the U.S. economy and putting us once more in a position where taxpayers have to bail out the billionaires while they end up paying for risks that the rich people took on,” Warren said as the bill faced a cloture vote last month.   

Senate Majority Leader John Thune (R-SD) has ended debate on the revised text, with an up or down vote expected this week, blocking efforts to saddle the bill with unrelated legistation looking for a ride in an exceedingly unproductive legistative session.

[June 17 Update,  The U.S. Senate passed the bipartisan GENIUS Act on June 17 by a vote of 68–30]