Congress Passes The GENIUS Act Without a CCCA Amendment

The House of Representatives on Thursday passed the GENIUS Act, a bill aimed at regulating stablecoins, giving the nascent digital currency a boost as a mainstream payment option.

The GENIUS (Guiding and Establishing National Innovation for U.S. Stablecoins) Act is intended to provide a legal structure for stablecoins and enhance consumer protections for using the currency. The bill, which passed a preliminary vote in the Senate in May without an amendment to attach the Credit Card Competition Act, now goes to President Trump’s desk to be signed into law. Supporters of the CCCA had hoped to win passage of the bill by linking it to the stablecoin legislation.

The GENIUS Act establishes federal oversight of stablecoins, as well as and state-level supervision. The bill also requires 100% reserve backing for stablecoins, monthly disclosure of reserves, and annual audits for larger issuers. 

“The GENIUS Act creates the necessary legal framework for the payments industry to incorporate stablecoins into existing systems,” Scott Talbott, executive vice president at the Electronic Transactions Association, says by email.“GENIUS imposes requirements for reserves, disclosures, anti-money laundering, and Bank Secrecy Act [provisions] and regulatory oversight. [These] are standard operating procedures for the payments industry.” At bottom, says Talbott, “The GENIUS Act’s regulations give the payments industry the green light to fully engage with stablecoins.”

A regulatory framework for stablecoins now paves the way for their use as a mainstream payment option. “Merchants’ hesitancy around accepting cryptocurrency [stems from] the volatility of its value, which can fall before a transaction is settled. Stablecoins eliminate that volatility and the risk for merchants,” says Cliff Gray, principal at Gray Consulting Ventures LLC.

Still, while the GENIUS Act should make stablecoins a more attractive payment option for merchants, Gray notes that an implementation issue exists at the point of sale. “Accepting stablecoins can be as easy as putting a QR code on a counter, but that requires having the right [processor] to provide the background services,” Gray says.

Exchanges that support the buying and selling of stablecoins and cryptocurrency are not well positioned to provide such services, Gray adds.

Meanwhile, the move by Congress to pass the stablecoin legislation without attaching another piece of payments legislation, the Credit Card Competition Act, deals a blow to the chances for passage of the CCCA in the current Congress, observers say. “The avenues for CCCA are dwindling and it continues to face an uphill battle,” Talbott says.

The Merchants Payment Coalition, which backs the CCCA and supported attaching it to the GENIUS Act, says the merchant community will continue to push for the bill’s passage. One reason is that banks are showing signs of wanting to dominate the stablecoin market, especially when it comes to using the digital currency to enable consumer payments, merchant groups contend.

The CCCA seeks to moderate interchange costs for merchants by requiring a wider choice of networks for transaction processing.

“We’re seeing the card companies trying to dominate stablecoins and create the same duopoly they have in cards,” says Doug Kantor, an MPC executive committee member and general counsel for the National Association of Convenience Stores. “We are glad the GENIUS Act passed and we think stablecoin technology will help merchants, but the bill does not address the issues [around merchant acceptance]. There is still work to be done in this area.”

Despite any qualms merchants have around stablecoin acceptance, the digital currency now has a brighter future as a consumer payment option, Gray says. “It’s exciting to see the potential here and the hope is that that potential won’t end up being a lot of buzz,” Gray says. “It just takes one or two major merchants to enable stablecoin or cryptocurrency acceptance and we will see a real tipping point.”