Yesterday, several bills were approved in the House of Representatives that should dramatically change the landscape for the digital asset sector. The GENIUS Act is legislation that provides federal rules for the issuance and usage of payment stablecoins. This bill will soon be signed into law by the President.
The CLARITY Act, a broader market structure bill that provides guidance on the regulation of various digital assets and outlines which agencies have oversight, was approved by the House but must then go through the Senate before it becomes law. This may take some time.
The Anti-CBDC bill bans the federal government from issuing a retail digital dollar. This is due to profound privacy concerns and the potential for government abuse.
Publicly traded shares of firms engaged in the crypto sector rallied on the news of passage in the House.
CI has received many comments from insiders on these bills. We share a few below.
Tom Bruni, Editor-in-Chief & VP of Community at Stocktwits, believes that investors have already been pricing in the impacts of these legislations.
“There’s a clear understanding that a regulated Stablecoin market is needed to facilitate the next phase of the crypto industry’s growth by offering a reliable medium of exchange and store of value. This will support the overall ecosystem by enabling transactions, cross-border payments, and decentralized finance (DeFi) applications, such as lending and borrowing,” said Bruni.
He added that, from an investor perspective, the transition from an anti-crypto administration to one that is supportive of digital asset innovation is more important than any new individual bill being approved.
“There’s still a significant amount of work to be done on the regulatory side in the U.S. and globally, but this week’s actions have helped keep things moving in the right direction. The strong flows into crypto and recent price action suggest investors are focused on the “big picture” and remain positive that the Anti-CBDC and CLARITY bills will eventually pass in some form, and that the broader “send of September” timeline that David Sacks has set out for comprehensive crypto industry rules will be met.”
Bruni notes that Bitcoin is trading at all-time highs, Ethereum is rising, along with certain altcoins, suggesting that the optimism of retail investors and traders continues. He says that retail investors are betting momentum will continue. Stocktwits Sentiment and Message Volumes for Bitcoin, Ethereum, and many other cryptocurrency and cryptocurrency-related stocks are firmly in ‘Extremely Bullish/High’ territory.”
Greg Magadini, Director of Derivatives at Amberdata, stated that the GENIUS Act has significant implications for the broader cryptocurrency sector, including USDC and USDT. As the legislation requires stablecoins to be backed by assets like US Treasuries, Magadini sees an implicit partnership with the US government. He believes this may lead to lower interest rates as demand increases.
“Circle also stands to gain substantial market share from USDT, which continues to remain non-compliant with many of the requirements in the GENIUS Act. USDT is not as transparent in their reserve holding compared to Circle.” Magadini notes.
He also sees stablecoin adoption cementing the US dollar as the “blockchain reserve currency.”
“In order to help grow adoption of USDC (and the like) the US government is now incentivized to continue to support the next waves of blockchain innovation… such as RWAs and tokenized stocks.”
Eli Cohen, General Counsel, Centrifuge & Chief Compliance Officer, Anemoy, says passage of the GENIUS Act is a giant step for the crypto industry, calling it a “turnaround for the ages” in contrast to the hostility during the Biden Administration.
“The stablecoin regime to be created by this soon-to-be law will be the principal reason why TradFi institutions finally feel safe to engage in the DeFi space and will be a huge boon for RWA market players like Centrifuge that act as the bridge between TradFi and DeFi,” Cohen says.
Cohen noted the surprisingly strong bipartisan support for the CLARITY Act, adding that there is a way forward in the Senate to overcome cloture rules and enact the legislation or something very similar.
General Counsel at Douro Labs, Brandon Ferrick, highlighted a few aspects of the CLARITY Act, including how it may create a dual-track system for crypto secondary markets: regulated, intermediated crypto activities (exchanges, brokers, dealers), as well as enabling DeFi.
The current language provides for a new exemption for an offering of $75 million, subject to the maturity of the network.
“Assuming the restrictions are met, the offers and sales of tokens are both exempt from the securities laws and the resulting tokens will not be regulated by the SEC, but rather the CFTC There is still some uncertainty on the penumbra, like DeFi aggregators or front-ends that optimize transactions for users. These will likely need to be resolved by regulations at the agency-level.”
Ryan Singer, Managing Partner of Vex Capital, is more excited about the CLARITY Act as we already have “two popular, well-regulated stablecoins.”
“While the GENIUS Act may reduce their regulatory scrutiny, I think that the CLARITY bill will have broader effects on the ecosystem.”