XRP News Today: GENIUS Act Passes, Regulating Stablecoins in US with 90% Cost Reduction

The GENIUS Act, or the Guiding and Establishing National Innovation for US Stablecoins Act, has been passed into law, marking a significant milestone in the regulation of stablecoins in the United States. This comprehensive legislation establishes the first set of regulatory guidelines for stablecoins, aiming to ensure that only Permitted Payment Stablecoin Issuers (PPSI) can issue or sell U.S.-pegged payment stablecoins. The Act mandates that federal agencies implement provisions defining acceptable stablecoin issuers and oversight mechanisms, thereby fostering a more secure and transparent stablecoin ecosystem.

A key provision of the GENIUS Act is the "Libra clause," which restricts tech giants and banks from dominating the stablecoin market. This clause requires non-bank issuers to establish separate entities to issue stablecoins, ensuring that these entities are subject to antitrust scrutiny and obtain clearance from a Treasury-led oversight committee. Traditional banks are also subject to strict rules, as they must issue stablecoins through legally distinct subsidiaries that are prohibited from engaging in leverage, lending, or risk-bearing activities. This creates a ringfenced structure that is described as more conservative than deposit-token proposals.

The GENIUS Act also includes a ban on yield-bearing stablecoins, which may drive institutional investors toward decentralized finance (DeFi) platforms. This ban is intended to secure the foundational stablecoin layer before allowing yield to be generated through DeFi. The legislation provides long-awaited regulatory clarity, granting crypto firms a path to legitimacy and giving the dollar a regulatory edge in the global digital currency race. Firms with less than $10 billion in assets can still operate under state money-transmitter laws, while larger issuers must obtain a national trust-bank charter. The bill mandates rigorous asset disclosures and imposes criminal penalties for issuers of unbacked tokens, effectively outlawing scenarios like the collapse of TerraUSD.

Critics argue that banning yield-bearing stablecoins could stifle innovation and push users toward international platforms. However, proponents believe that this move will accelerate institutional interest in DeFi platforms, especially those on Ethereum, which already leads in total value locked. The GENIUS Act's dual regulatory pathway, allowing state or federal oversight for stablecoin issuers, fosters competition while preventing regulatory arbitrage. This approach is expected to reduce transaction costs by over 90%, making stablecoin ecosystems increasingly attractive to both consumers and corporations.

The GENIUS Act requires stablecoin reserves to be maintained in cash or short-term U.S. government debt, significantly reducing systemic risk. This provision, along with the rigorous oversight and transparency measures, aims to ensure the stability and reliability of stablecoins in the U.S. market. The Act's passage is seen as a turning point for stablecoins, paving the way for their mainstream adoption and integration into the broader financial system.

Versan Aljarrah, co-founder of Black Swan Capitalist, claims that Ripple’s RLUSD, which is fully compliant and Treasury-backed, could become a key tool for the U.S. to extend its global dollar reach. Aljarrah envisions RLUSD enabling real-time cross-border settlements using tokenized U.S. debt on XRP’s liquidity layer for efficiency. He suggests that the Treasury might leverage this compliant stablecoin globally, potentially threatening Tether’s USDT dominance under the new law. RLUSD holds 1:1 dollar reserves and U.S. Treasuries and operates natively on Ripple’s XRP Ledger.

Aljarrah proposes using RLUSD for instant international settlements. His model combines tokenized U.S. debt with XRP’s liquidity network. He cites rising gold reserves and U.S. deficits as justification. Future gold-backed tokens on XRPL could enhance transparency, he suggests. The GENIUS Act favors regulated options like RLUSD. Tether’s USDT currently meets 81.5% of requirements and has 36 months for full compliance. Ripple’s existing infrastructure supports cross-chain asset transfers. Ethereum also benefits from regulatory clarity, with analysts eyeing $4,000 targets.