The Future of Stablecoins Hangs on Action From Congress

With action Tuesday by the U.S. Senate to pass the GENIUS Act, the move to establish rules that would govern the burgeoning stablecoin industry now transits to the U.S. House of Representatives, where lawmakers have developed their own set of rules, the STABLE Act. Meanwhile, stablecoin-market participants are looking to the action in Congress to yield clear regulation that will lend yet more momentum to the market.

Indeed, stablecoins represent “the new bandwagon everybody wants to jump on,” says Enrico Camerinelli, a strategic advisor at the consultancy Datos Insights. Stablecoin market capitalization stood at $246 billion in May, up from $20 billion in May five years ago, according to an analysis by Deutsche Bank.

While nobody can predict how the two bills in Congress will be reconciled, market participants expect clear rules will make it easier for established players to grow and for new entrants to get established. Already, “stablecoins are growing like crazy. It’s easy, it’s safe,” says Carlos Netto, cofounder and chief executive of Matera, a provider of technology for core banking and instant-payment technology that is working with the big stablecoin platform Circle Internet Group to speed adoption of the digital money.

Stablecoins are cryptocurrency whose value is tied to a national currency, such as the dollar. This link allows stablecoins to avoid the up-and-down swings in value other blockchain-based currencies like Bitcoin are subject to. Partly for this reason, “stablecoins aren’t niche any more. They’re becoming infrastructure,” argues Kevin Rusher, founder and chief executive of Regnum Aurum Acquisition Corp., in an email. RAAC builds links between blockchain technology and assets like real estate.

Support in the Senate for its bill was overwhelming, as it passed by a vote of 68 to 30. Action in the House will revolve around reconciling provisions of its STABLE Act, or Stablecoin Transparency and Accountability for a Better Ledger Economy Act, with the GENIUS (Guiding and Establishing National Innovation for U.S. Stablecoins) Act. The latter bill’s requirements include a one-to-one reserve, openness to both banks and non-bank participants, a diversity of assets in the reserve backing coins, and a ban on use of “riskier assets,” such as corporate debt or equities. The STABLE Act maintains that federal approval of stablecoin issuers would prevail over any contrary state law, a provision not included in the GENIUS Act.

Passage of a reconciled set of rules now will be crucial to market growth for stablecoins, observers argue. “It will bring more legal clarity, and will get more people to use [stablecoins],” says Eric Grover, principal at Intrepid Ventures, a payment consultancy.