US Congress Passes GENIUS Act, Bans Fed CBDC, Advances CLARITY Act

The US Congress has concluded its Crypto Week with significant developments in cryptocurrency legislation. The House of Representatives passed the GENIUS Act, a landmark stablecoin bill, with bipartisan support after several revisions. This bill is now headed to the president's desk for signature. The GENIUS Act will come into effect 18 months after the president's signature or 120 days after the final regulations are published by the US Treasury and Federal Reserve. Once in effect, stablecoin issuers will be subject to strict reserve requirements and the Bank Secrecy Act.

The House also passed the CLARITY Act, a market structure bill championed by the blockchain industry, and a bill banning the Federal Reserve from issuing a central bank digital currency (CBDC). These two bills will now proceed to the Senate, where they may face further deliberation and amendments due to the slimmer pro-crypto Republican majority.

The GENIUS Act, once signed into law, will compel many American stablecoin issuers to become banks, as they will be limited solely to stablecoin issuance. Most US stablecoin issuers currently offer more services, and pursuing a bank charter would allow them to issue stablecoins along with a wider range of activities without needing state-to-state licenses. However, the final version of the bill does not include a provision for stablecoin issuers to offer interest on customer stablecoin reserves, a point of contention for some industry leaders.

Three years after the bill is signed, no foreign stablecoin issuers that aren’t approved in the US will be able to offer a stablecoin in the country, with some exceptions if the US Treasury deems the issuer's country of origin has a comparable regulatory regime.

The CLARITY Act aims to offer "digital commodities on mature blockchains" an exemption from the Securities Act of 1933 and reassign regulatory oversight from the Securities and Exchange Commission (SEC) to the Commodity Futures Trading Commission (CFTC). Despite criticism from some House Democrats, the act enjoyed significant bipartisan support.

Senate Democrats who supported the GENIUS Act may also vote in favor of the CLARITY Act, despite vocal criticism from crypto-skeptic Democrats. The vote on the Anti-CBDC bill was closer, reflecting a more partisan divide on whether the Fed should be prevented from issuing a digital dollar. If a few Senate Democrats vote for the bill, it could have a chance at passing.

The crypto industry is optimistic about these developments, viewing them as a significant step towards the full integration of crypto into the country’s financial system. Industry leaders believe that pro-crypto laws in the US could influence laws abroad and help the US reclaim digital asset leadership. With more politicians swinging pro-crypto, the passage of these bills seems more a matter of "when" than "if."