Ethereum News Today: GENIUS Act Introduces Strict Stablecoin Regulations, Boosting Dollar's Global Edge

The recently enacted GENIUS Act has introduced significant changes to the stablecoin market, particularly with a provision aimed at preventing technology giants and major financial institutions from dominating the sector. According to Circle Chief Strategy Officer Dante Disparte, any non-bank entity looking to issue a dollar-pegged token must establish a separate entity that operates independently of the parent company. This new entity must also clear antitrust hurdles and face scrutiny from a Treasury Department committee, which has the authority to veto the launch.

Banks are not exempt from these regulations either. Lenders issuing stablecoins must keep these coins in a legally separate subsidiary and maintain a balance sheet that avoids risk-taking, leverage, and lending. This structure is even more conservative than the deposit-token models proposed by institutions like JPMorgan. Disparte believes this approach creates clear rules that ultimately benefit US consumers, market participants, and the dollar itself.

The GENIUS Act, which passed with bipartisan support, aims to give the dollar a competitive edge in the global digital-currency race. The bill provides a path for legal and regulatory clarity in the United States, allowing the crypto industry to compete on a more level playing field. It preserves existing state money-transmitter laws for issuers with assets under $10 billion but requires a national trust-bank charter for those exceeding this threshold. The law also bans interest-bearing stablecoins, enforces rigorous disclosure standards, and introduces criminal penalties for unbacked “stable” tokens, effectively ending experiments like Terra.

Critics argue that the ban on yield could hinder consumer adoption and give an advantage to overseas issuers. However, Disparte contends that yield is a secondary-market innovation better handled by decentralized finance (DeFi) protocols once the base layer is secure. The ban on yield-bearing stablecoins could redirect investor demand toward Ethereum-based DeFi platforms, making DeFi the primary option for generating passive income onchain. This shift is particularly significant for institutional investors, who have fiduciary duties to generate returns. Analysts predict that this could lead to a surge in institutional capital flowing into DeFi, especially on Ethereum, which dominates the total value locked in the sector.

The GENIUS Act establishes the first federal stablecoin regulations in the U.S., linking digital assets to Treasury reserves and reinforcing the dominance of the dollar. This regulatory clarity mandates 1:1 reserves and redefines stablecoins as foundational infrastructure for programmable money, potentially boosting Ethereum's institutional adoption and market normalization. The Act also activates America's first regulatory framework for stablecoins, providing a clear path for the industry to operate within a structured environment.