Senator Bill Hagerty intends to introduce legislation on Feb. 4 to establish a regulatory framework for stablecoins, Bloomberg News reported.
The bill — dubbed the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act — will outline provisions for issuing stablecoin payments and mandate that they be backed by US currency, Federal Reserve notes, Treasury bills, or other assets.
The bill will also require stablecoin issuers to submit monthly audited reports on their reserves. False reporting would result in criminal penalties.
Regulators have scrutinized the quality of assets backing stablecoins, including Tether’s USDT token, amid concerns over liquidity and the ability to meet mass redemption requests under market stress.
As a result, the bill seeks to provide regulatory clarity for stablecoins, which are tokens pegged to the US dollar and other real-world assets. Proponents argue that federal oversight would enhance credibility and promote broader adoption of stablecoins within the financial system.
Hagerty said:
“My legislation establishes a safe and pro-growth regulatory framework that will unleash innovation and advance the President’s mission to make America the world capital of crypto.”
Senators Kirsten Gillibrand, Tim Scott, and Cynthia Lummis are co-sponsoring the bill. The initiative represents a continued effort among Republican lawmakers to create guidelines for the crypto industry, a sector President Donald Trump has prioritized.
The Office of the Comptroller of the Currency, an independent bureau within the Treasury Department, would regulate and supervise nonbank stablecoin issuers.
Propelling stablecoin growth
Trump has committed to fostering the crypto industry by reducing regulatory barriers and appointing crypto-friendly regulators.
On his first week in office, he signed an executive order to create a crypto working group, halt developments regarding a US central bank digital currency, and assess and potentially establish a digital asset stockpile.
However, while the order established a working group to propose a regulatory framework for digital assets, any substantive policy changes would require congressional approval. Both major parties have signaled an interest in addressing stablecoin regulation.
Notably, the legal framework could spur growth in the stagnated US stablecoin market. According to Chainalysis’ “2024 Geography of Crypto Report,” stablecoin volume is shifting away from US platforms, likely due to barriers imposed by sputtering regulatory progress on stablecoins and digital assets.
In 2023, the stablecoin flows to US crypto exchanges reached nearly 50%, falling below 40% in June 2024. The report suggested that global stablecoin adoption is outpacing US dollar usage.
Based on CryptoSlate data, the stablecoin market surpassed $215 billion in size and over $34 trillion in yearly aggregated transfer volume as of Feb. 3.
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