A new act establishing the first comprehensive regulatory framework for payment stablecoins in the US has been signed into law. The GENIUS Act (standing for Guiding and Establishing National Innovation for US Stablecoins) is considered as the most significant piece of legislation in the US in the digital assets domain to date, and it highlights the current administration’s and Congress’s commitment to the development of a regulatory framework for digital assets in the US.
The new act is prioritizing enhancing consumer protection, strengthening the US dollar’s reserve currency status, bolstering the US national security and is intended to make the US a leader in digital assets, writes Herzog law firm.
Key provisions include:
Scope of application: the act creates a framework for “payment stablecoins”, i.e. digital assets that are, or are designed to be, used as a means of payment or settlement, and the issuer of which is:
- obligated to convert, redeem or repurchase for a fixed amount of monetary value, not including a digital asset denominated in a fixed amount of monetary value; and
- represents that such issuer will maintain, or create the reasonable expectation that it will maintain, a stable value relative to the value of a fixed amount of monetary value.
The definition of “payment stablecoin” under the act does not cover digital asset that is (i) a national currency; (ii) a deposit, including a deposit recorded using distributed ledger technology; or (iii) a security.
As specifically provided by the act, it is intended to have extraterritorial effect if conduct involves the offer or sale of a payment stablecoin to a person located in the US.
Who can issue stablecoins?
Under the act, generally, payment stablecoins may only be issued by “permitted payment stablecoin issuer”. “Permitted payment stablecoin issuer” would include a person formed in the US that is:
(a) a subsidiary of an insured depository institution or an insured credit union that has been approved to issue payment stablecoins by the primary Federal payment stablecoin regulator;
(b) a federal qualified payment stablecoin issuer; or
(c) a state qualified payment stablecoin issuer (for smaller issuers and under certain circumstances).