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Bitcoinist 2025-12-27 03:00:05

The State Of US Stablecoin Legislation: Unresolved Issues And Challenges

In a recent report, market expert Colin Wu shed light on the ongoing issues facing the cryptocurrency industry as a result of stablecoin legislation, notably the GENIUS Act, which was enacted in July under President Donald Trump’s administration. While this bill is viewed as a significant win for the digital asset market—anticipating increased adoption and utilization in the foreseeable future—it brings with it a host of complications that warrant attention. Wu Highlights Potential Risks In The GENIUS Act Wu’s analysis emphasizes that the GENIUS Act has led to heightened global demand for US dollars and Treasury securities, which, while bolstering the dollar’s international standing, has also inadvertently benefited the Trump family and associates linked to the crypto industry. However, this development has opened new challenges for the oversight of dollar flows globally and raises concerns about the stability of the traditional financial system in the United States. A notable concern is how the trading of crypto assets enabled by USD stablecoins has evolved into a complex and less observable method for the US to extract wealth worldwide. Wu asserts that this mechanism poses significant threats to the monetary sovereignty and financial security of other nations. The GENIUS Act outlines reserve asset categories like bank deposits, short-term Treasuries, and repo agreements. However, the fluctuating values of these assets can lead to potential insufficiencies in reserves, particularly if Treasury prices decline. How Stablecoin Laws May Undermine The Industry’s Foundations Wu also explained that addressing the challenges of fiat stablecoins, lawmakers are likely to instigate regulations affecting all crypto assets, including Bitcoin (BTC) and Real-World Assets (RWAs), since these assets rely heavily on stablecoins. Currently, licensed financial institutions cannot directly engage in trading, clearing, or custody of crypto assets due to the lack of legal recognition, leaving these opportunities to unregulated private firms. This scenario has reportedly led to higher profits for unregulated actors while increasing pressure on banks and the broader financial ecosystem. Consequently, this dynamic has prompted government authorities to hasten stablecoin regulation. Once crypto assets receive full legal recognition, banks are expected to step into the market completely. This shift would enable banks and payment institutions to tokenize deposits, allowing them to directly link deposit tokens with traditional financial elements. The overall trend in the US indicates a move toward a system where heavily regulated banks establish stability. This shift would reportedly facilitate the principle of “same business, same regulation,” leading to diminished risks for the monetary and financial structure. However, this transformation through stablecoin legislation may threaten the very foundation of the stablecoin industry itself. Wu concludes that in this context, it would be illogical for other nations to replicate the aggressive push for stablecoin development that the US has adopted. Featured image from DALL-E, chart from TradingView.com

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