US Congress Passes GENIUS Act, CLARITY Act, Bans CBDC

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 rounds of 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 signs it or 120 days after the relevant federal regulators publish the final regulations. Once in full effect, stablecoin issuers will be held to strict reserve requirements and will be subject to 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 head to the Senate, where they may face more 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. This is because the act limits stablecoin issuers solely to that activity, and most US stablecoin issuers already offer more services than just making stablecoins. According to a crypto-focused lawyer, these issuers will likely pursue a bank charter to issue stablecoins along with a wider range of activities without needing state-to-state licenses.

The crypto industry did not get everything it wanted in the GENIUS Act. Coinbase CEO Brian Armstrong had advocated for a provision allowing stablecoin issuers to offer interest on customer stablecoin reserves, arguing that it would democratize access to market rate yields. However, the final version of the bill does not include this provision. Additionally, the bill stipulates that three years after its signing, no foreign stablecoin issuers that aren’t approved in the US will be able to offer a stablecoin in the country, with some exceptions for countries with comparable regulatory regimes.

The CLARITY Act, which offers an exemption from the Securities Act of 1933 for digital commodities on mature blockchains and reassigns regulatory purview over crypto from the Securities and Exchange Commission (SEC) to the Commodity Futures Trading Commission (CFTC), enjoyed significant bipartisan support in the House despite criticism from some House Democrats. The bill's passage reflects a growing acceptance of cryptocurrency within the political landscape, although it remains to be seen how it will fare in the Senate.

The Anti-CBDC bill, which aims to prevent the Federal Reserve from issuing a digital dollar, passed with a closer vote, reflecting a more partisan divide. The bill's sponsor criticized CBDC as "insidious technology" that would undermine privacy rights. If a few Senate Democrats vote for the bill, it could have a chance at passing, given that a recent poll found that 22% of Democrats oppose a CBDC.

The crypto industry is optimistic about the passage of these bills, viewing them as a significant step toward the full integration of crypto into the country’s financial system. Crypto leaders believe that these laws could influence global policy 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."