GENIUS Act Aims to Extend US Jurisdiction to Foreign Stablecoin Issuers

The latest version of the stablecoin GENIUS Act has introduced significant changes that could impact foreign issuers like Tether. The revised bill, which failed to advance to formal debate in the Senate on Thursday, includes a key amendment that extends US jurisdiction to foreign issuers serving US users, regardless of their registration location. This change aims to address regulatory ambiguity for entities like Tether, which has been a subject of scrutiny due to its claims of being the seventh largest holder of US debt.

The new version of the GENIUS Act includes several other notable revisions. One of the most significant is the addition of an "Extraterritorial Application" clause, which requires foreign issuers to comply with US regulations if they target US users. This clause, combined with the allowance for the expansion of reserve asset types, indicates a bias towards companies like Tether. Additionally, the bill expands the definition of "digital asset service provider" to include developers, validation nodes, and self-hosted wallets, sparking debate within the DeFi community about compliance with the Bank Secrecy Act and AML regulations. The bill also stipulates liability for the use of unauthorized stablecoins, such as decentralized stablecoins.

Another key change in the new version is the "Safe Harbor Provision," which authorizes the Secretary of the Treasury to provide regulatory flexibility for small or experimental projects. However, this provision also allows for unilateral action in "emergency situations," a move that has been criticized for granting excessive administrative power. Currently, the bill has only received support from Republicans, and its passage may be challenging without Democratic backing. Industry insiders anticipate that a motion for debate in the Senate could be initiated again by the end of the month.

This development underscores the ongoing efforts to regulate stablecoins and digital assets, with the US aiming to assert its jurisdiction over foreign issuers serving its users. The changes in the GENIUS Act reflect a broader trend towards increased regulatory oversight in the digital asset space, with implications for both centralized and decentralized stablecoin issuers. The outcome of the Senate debate and the eventual passage of the bill will be closely watched by industry participants and regulators alike.