#GENIUSAct
21 articles tagged #GENIUSAct — curated RWA tokenization coverage.
Can GENIUS Act stablecoin issuers create money in ways not anticipated?
The proposed GENIUS Act introduces potential regulatory loopholes that could grant stablecoin issuers unprecedented balance sheet flexibility, effectively enabling active money creation beyond current expectations. While traditional banking involves money creation through lending, stablecoin issuers are typically viewed as demand-driven entities that do not displace existing bank deposits. Analysis from the White House Council of Economic Advisers suggests that stablecoin issuance is currently a passive process where deposits simply shift between accounts rather than disappearing. However, the GENIUS Act may inadvertently allow issuers to scale operations in ways that deviate from this passive model, potentially mimicking bank-like money creation. This development has largely escaped the scrutiny of the Office of the Comptroller of the Currency and major banking associations during recent rulemaking processes. The implications for the RWA market are significant, as this shift could fundamentally alter the monetary role of stablecoins within the broader financial ecosystem. Understanding this mechanism is critical for regulators aiming to maintain stability as digital assets become increasingly integrated with traditional Treasury-backed instruments.
BIS identifies stablecoin gaps. Regulation and innovations are already closing them
The Bank for International Settlements (BIS) has shifted its stance on stablecoins, moving from a dismissive critique of their soundness to a more constructive, prescriptive approach. While the BIS continues to highlight persistent challenges such as financial integrity, governance on permissionless rails, and blockchain fragmentation, it now emphasizes a two-pronged strategy involving coordinated regulation and the development of interoperable platforms. This strategy centers on the BIS unified ledger concept and Project Agorá, which aim to integrate tokenized commercial and central bank money. Notably, the report overlooks rapid private sector advancements that are already addressing these identified gaps. For instance, the US Hazel Network has introduced programmable compliance controls and mechanisms for deposit-to-stablecoin transitions that mitigate fragmentation. Furthermore, the GENIUS Act contains language that may provide a pathway for stablecoin elasticity, contrasting with more restrictive frameworks in Europe and the UK. These developments indicate that the market is proactively solving the structural deficiencies previously identified by global regulators. This evolution signals a maturing RWA landscape where private innovation and regulatory frameworks are beginning to align to create more robust digital monetary systems.
‘Market integrity’ or DeFi risk? Paradigm, HPC question stablecoin rule scope
The Hyperliquid Policy Center and venture capital firm Paradigm submitted a joint comment letter to the U.S. Treasury regarding proposed stablecoin compliance rules linked to the GENIUS Act. While supporting the general framework, the organizations expressed concern that current proposals could inadvertently impose unworkable obligations on permissionless blockchain infrastructure and secondary market participants. The letter outlines six critical areas for improvement, specifically requesting clearer guidance on transaction blocking, sanctions compliance, and Customer Due Diligence requirements. By advocating for more precise definitions, the groups aim to prevent overly stringent regulations from stifling DeFi innovation or forcing operations into offshore jurisdictions. Furthermore, the commentary addresses the distinction between stablecoin issuers and third-party entities regarding yield distribution, noting that the proposed CLARITY Act seeks to preserve activity-based rewards. This regulatory dialogue highlights the ongoing tension between maintaining market integrity and preserving the functional nature of decentralized networks. As the New York State Department of Financial Services works to align its oversight with federal standards, these recommendations serve as a pivotal effort to ensure compliance frameworks remain compatible with blockchain technology.