Stablecoins, the GENIUS Act and the CLARITY Act
“The Fed’s proposals show that stablecoins no longer need to wait for the broader market-structure fight to resolve. With the CLARITY Act stalled in the Senate, the GENIUS Act rulemaking is effectively making payment stablecoins the first fully regulated on-ramp between crypto rails and the banking system.”
– Alex Witt, general partner, Verda Ventures
“The Federal Reserve has proposed rules implementing its responsibilities under the GENIUS Act, adding detail on how federally supervised stablecoin issuers would operate. Under the proposal, payment stablecoins would need to be backed one-to-one by permitted reserve assets, including highly liquid assets such as short-term U.S. Treasury bills. The Fed has also proposed capital requirements intended to cover credit and operational risks.
“These are important safeguards. If stablecoins are going to operate inside mainstream financial infrastructure, there needs to be certainty around what sits behind the token, how redemption works, and how the issuer behaves during periods of market or operational stress.
The proposals also continue a broader regulatory effort to separate payment stablecoins from conventional deposit products. That includes restrictions around paying interest or yield directly to holders.
“I think that is the part that deserves more debate. If stablecoin issuers are required to hold highly liquid assets and those assets generate a return, there is a reasonable question around whether regulated issuers should be completely prevented from passing some of that return to users.
“The concern around creating deposit-like products outside normal banking regulation is understandable. But a blanket restriction could become increasingly difficult to maintain as stablecoins become more integrated into regulated financial services.
“More broadly, the direction is positive. The industry has spent years asking for clarity around stablecoins. We are now getting into much more practical questions about reserves, capital, redemption and consumer protection. This allows financial institutions to start building around them.”
– Raj Kamal, CEO, TransFi
“Months of work have failed to produce an agreement, leaving some of the most basic questions about jurisdiction and digital asset market structure unresolved.
“I do not read that as Washington rejecting digital assets, because the market has already gone well beyond that point. Banks, asset managers, payment companies and public companies already have exposure to digital assets, stablecoins and tokenized markets in one form or another. Congress can delay the rules, but it cannot pretend the market is waiting for permission to exist.
“My concern is much simpler: uncertainty costs money. Institutions delay decisions, lawyers spend more time interpreting rules that were written for another market, companies build around several possible regulatory outcomes, and capital looks for jurisdictions where the answer is clearer. None of that kills innovation, but it makes participation harder and more expensive than it needs to be.”
– Ryan Kirkley, co-founder and CEO, Global Settlement
SoFi, Mastercard and stablecoins
“The SoFi and Mastercard launch is one of the clearest examples yet of stablecoins moving into conventional financial infrastructure.
“SoFi is migrating its entire debit and credit card programme to settlement using SoFiUSD, its U.S. dollar stablecoin. The programme is expected to process more than $25 billion in annualized transaction volume.
“The important part is that very little changes for the person making the payment. The consumer still uses a card. They do not need to understand which asset is being used for settlement or which blockchain sits underneath the transaction.
“The change happens between financial institutions. Traditionally, card settlement can leave money moving between different participants for a period of time before final settlement takes place. That creates float and requires financial institutions to manage liquidity around those settlement windows.
“Stablecoin settlement makes it possible to move that value continuously, including outside conventional banking hours. For merchants, faster access to settled funds can improve working capital. That can be particularly relevant on weekends or other periods when settlement delays extend beyond the point of purchase.
“For financial institutions, the benefit is different. Reducing the amount of time money spends in transit can reduce the amount of capital tied up in the settlement process.
“I think the SoFi example is much more significant than simply another company launching a stablecoin. It shows how stablecoins can sit underneath a payment product that people already use.”
– Kamal
Tokenization
“The UK reached another important milestone this week through the Great British Tokenized Deposit initiative. Barclays, HSBC UK, Lloyds Banking Group, Monzo, Nationwide, NatWest and Santander completed live customer transactions using tokenized sterling deposits on shared infrastructure built by Quant.
“The transactions included remortgage payments and person-to-person marketplace transactions. The next phase of the initiative is expected to explore digital-asset settlement.
“This matters because tokenized deposits take a different route from stablecoins. A tokenized deposit remains a liability of a commercial bank. Instead of creating a separate form of privately issued money backed by reserve assets, the existing bank deposit is represented on programmable infrastructure.
“That means some of the benefits associated with blockchain-based payments can potentially be introduced without moving money outside the commercial banking system.
“The remortgage example is particularly useful. Funds can be linked to a specific condition and released once the underlying property transaction is confirmed. Payment and the event that triggers payment can therefore become part of the same process.
“That can reduce some of the manual reconciliation and coordination sitting between different participants in a transaction.
“The question now is how far this model can extend. Seven large banks transacting across common interoperable infrastructure is meaningful progress. But global payments require money to move across many more banks, currencies, jurisdictions and forms of infrastructure.
“If every market develops its own closed tokenized-deposit network, some of the existing fragmentation in payments simply gets reproduced using new technology. The more interesting question is whether tokenized commercial bank money can eventually move between these networks and interact with other regulated forms of digital money.”
– Kamal
“BlackRock’s move with Ondo Finance to launch tokenized investment portfolios for non-US investors is one of the developments I find most important this week.
“The digital-asset opportunity goes well beyond the price of Bitcoin. It includes changing how familiar financial assets are issued, owned, traded, settled and used as collateral, and the involvement of the world’s largest asset managers makes that increasingly difficult for traditional finance to dismiss as an experiment.
“There are still real questions around liquidity, regulation and what happens when tokenized products trade outside the hours of their underlying markets, but these are market-structure problems that institutions can solve.
“I expect the line between traditional finance and digital assets to matter less over time. The underlying exposure can remain an equity, bond or fund while the infrastructure supporting that asset moves on-chain. That is a far larger structural shift than any single week of crypto price action.”
– Utkarsh Ahuja, founder and managing partner, Moon Pursuit Capital
Crypto
“Bitcoin falling below $83,000 alongside higher Treasury yields, a stronger dollar, rising oil prices and renewed geopolitical uncertainty is not simply a crypto story.
“I remain constructive on digital assets over the medium and long term, but crypto remains highly sensitive to liquidity and positioning, and tighter financial conditions feed through quickly. Leverage then amplifies those moves, which can turn a broader macro repricing into a much sharper crypto selloff.
“I also still believe the historical crypto cycle matters as we head into Q4. September delivered the volatility I expected, and the question now is whether positioning clears while the macro backdrop improves. If yields stay high and the dollar keeps strengthening, there is room for further pressure. If those conditions reverse after leverage has been flushed out, crypto can reprice quickly.”
– Ahuja
“Blockchain.com’s potential IPO matters because public markets require a different level of scrutiny. The company has reportedly discussed raising around $500 million at a valuation between $4 billion and $6 billion after confidentially filing with the SEC earlier this year.
“Personally, I think that scrutiny is good for crypto. If you want institutional capital, you have to be prepared to answer institutional questions. What does the revenue actually look like? How strong is the governance? Where does the risk sit? How does the business perform when crypto prices fall, and trading activity dries up? A good story can get investors through the door, but it cannot carry a public company forever.
“We spent years debating whether institutions would take digital assets seriously, and I think we can stop having that debate now. They do. The harder question is whether the market underneath them is ready for the amount of institutional capital that could come next.
“The OpenAI story might look completely separate from crypto, but I actually think it helps explain why the infrastructure conversation matters so much. The company is reportedly discussing another $30 billion raise at a valuation of as much as $1.4 trillion, while a potential IPO may not happen until 2027 at the earliest.
“Those numbers are extraordinary, but what interests me is what sits underneath them. Companies can now reach enormous scale while remaining private, raise tens of billions of dollars from investors around the world and deploy that capital across compute, energy, data centers, talent and infrastructure in multiple markets.
“AI needs chips and power, obviously, but somebody still has to finance it all. Investors need liquidity, companies need to move money across jurisdictions, counterparties need collateral, and ultimately those transactions need to settle.
“This is why I think we sometimes undersell the institutional case for digital asset infrastructure by reducing the conversation to whether a pension fund wants Bitcoin exposure. That is part of the market, but it is not the whole story. The more important question for me is how money, collateral and ownership move between institutions as the financial system gets larger and more complex.
“Stablecoins, tokenized assets and programmable settlement matter when they solve those problems. If they can reduce the time and friction involved in moving capital while preserving compliance and certainty, there is a very obvious institutional use case. You do not need to believe every asset belongs onchain to recognize that the infrastructure used to move trillions of dollars can be better.
“Then you have Bitget, and I think this is where the conversation gets more uncomfortable. The exchange says roughly $388 million was lost in the breach, while CEO Gracy Chen has said she is not optimistic all the assets will be recovered. NEAR Intents says it blocked more than $50 million connected to the attack, while Tether and Circle blacklisted a wallet linked to the exploit and froze more than $300,000 in USDT and USDC.
“Everyone will understandably focus on the security failure, but I think the response afterwards deserves just as much attention. Once compromised assets start crossing networks and venues, the clock is working against you. Exchanges, issuers and infrastructure providers have to identify what happened, trace the assets and coordinate quickly enough to do something about it.
“That exposes a trade-off the industry sometimes avoids talking about. We want faster settlement because it reduces counterparty risk and gives institutions better access to liquidity, but speed can work against you when the controls around it are weak.
“I do not think the answer is slowing the system down. The answer is building better controls into the system itself. Identity, compliance, custody, transaction monitoring and settlement cannot be treated as separate products that somebody stitches together afterwards. If we want institutions to trust digital markets with serious amounts of capital, all of those pieces have to work together.
“When I look across these stories, I do not see four unrelated developments. I see a crypto company preparing to ask public investors for hundreds of millions of dollars, an AI company potentially raising another $30 billion privately, lawmakers still arguing over the rules for digital asset markets and an exchange breach showing just how quickly hundreds of millions can disappear once something goes wrong.
“The problem is not a shortage of capital or demand. We have plenty of both. The harder problem is making sure the infrastructure underneath that capital can handle what we are asking it to do.
“And I think that is where the next phase of digital assets gets decided. Creating another token is not particularly difficult. Building a market where an institution knows who its counterparty is, where its liquidity sits, how its collateral moves, when a transaction becomes final, which rules apply and what happens when something breaks is much harder.”
– Kirkley