U.S. lawmakers are revisiting the GENIUS Act , a proposed stablecoin regulation framework, with significant amendments. These could restrict major tech giants like Amazon, Google, Meta, and Microsoft from participating in the stablecoin market. These changes aim to address growing concerns about consumer protection, market stability, and the misuse of stablecoins for illicit activities.
Stricter Rules Target Big Tech
The revised GENIUS Act includes several contentious measures, such as a possible prohibition on publicly traded tech companies from issuing or holding stablecoins. Companies like Meta, Amazon, Google, and Microsoft would be barred from launching stablecoins unless they adhere to stringent criteria. These include robust financial risk management, enhanced consumer data privacy protections, and equitable business practices.
This move is designed to separate banking and commerce within the U.S., preventing large non-financial corporations from consolidating financial power. While the final version of the bill is still under review, discussions suggest that these companies may even be barred from holding stablecoins altogether. This is unless they divest from certain operations.
If adopted, the stricter rules would effectively lock out these tech giants from the stablecoin economy. This exclusion will hold unless they comply with stringent regulatory standards.
Addressing the WLFI Stablecoin Controversy
One of the driving forces behind the updated GENIUS Act is the controversy surrounding World Liberty Financial (WLFI) and its issuance of the USD1 stablecoin. Critics argue that the branding of USD1 implied an affiliation with the U.S. government. This impression is due to its connection with former President Donald Trump.
The revised bill seeks to prevent stablecoins from mimicking official U.S. assets or leveraging political influence for branding purposes.
In addition to addressing the WLFI controversy, the bill includes ethics provisions targeting high-profile individuals in government advisory roles. These individuals may have conflicts of interest between their public duties and private crypto ventures. Notable figures like Elon Musk could face restrictions. These apply if they attempt to launch or engage with stablecoins while holding government advisory positions.
Balancing Innovation and Regulation
The GENIUS Act initially failed to pass the Senate on May 8 due to opposition from both Democrats and Republicans. However, the recent bipartisan amendments demonstrate lawmakers’ determination to pass the bill before the upcoming Memorial Day recess.
While the updated framework imposes heavy restrictions, it aims to strike a balance between fostering innovation and safeguarding the financial system.
“The revised bill is an attempt to strike a balance between innovation and protecting the financial system,” lawmakers noted.
By opening the door for tech companies to participate in the stablecoin market under strict oversight, the bill seeks to mitigate risks. Meanwhile, it allows room for growth in the digital asset space.
Why Regulate Big Tech in the Stablecoin Market?
Stablecoins have gained immense popularity in the U.S. This rise in popularity was particularly pronounced following former President Donald Trump’s rejection of a U.S.-based Central Bank Digital Currency (CBDC) . However, their rapid adoption has raised red flags among regulators. These concerns relate to consumer protection, market stability, and potential misuse in illegal activities.
Lawmakers argue that separating banking and commerce is essential to prevent financial power from being concentrated in the hands of a few massive corporations. The restrictions on tech giants are intended to ensure that stablecoins remain a tool for financial inclusion. This is rather than a vehicle for monopolistic control.
Implications for the Crypto Market
If the updated Act passes, it could significantly reshape the stablecoin landscape. By barring major tech companies from issuing or holding stablecoins, the bill may pave the way for smaller, more specialized players to enter the market.
At the same time, the stricter regulations could enhance trust and transparency in the stablecoin ecosystem. This aims to address concerns about fraud and misuse. For consumers, this could mean greater confidence in using stablecoins for everyday transactions.
However, critics warn that overly restrictive measures might stifle innovation and push development overseas. Other jurisdictions may offer less stringent regulatory frameworks.
